2025 ANNUAL REPORT
Advantage Energy Ltd. - 1
CONTENTS
MESSAGE TO SHAREHOLDERS ...................................................................................................................................... 2
RESERVES ...................................................................................................................................................................... 4
CONSOLIDATED MANAGEMENT’S DISCUSSION & ANALYSIS ...................................................................................... 10
CONSOLIDATED FINANCIAL STATEMENTS .................................................................................................................. 58
Independent Auditor’s Report ............................................................................................................................ 59
Consolidated Statements of Financial Position .................................................................................................. 65
Consolidated Statements of Comprehensive Income ........................................................................................ 66
Consolidated Statements of Changes in Shareholders’ Equity ........................................................................... 67
Consolidated Statements of Cash Flows ............................................................................................................. 68
Notes to the Consolidated Financial Statements ............................................................................................... 69
ADVISORY .................................................................................................................................................................. 116
Advantage Energy Ltd. - 2
MESSAGE TO SHAREHOLDERS
Advantage Energy Ltd. (“Advantage” or the “Corporation”) is pleased to report 2025 year-end financial and
operating results. Advantage achieved exceptional results during the year, with record production, strong reserves
metrics, compelling recycle ratios(a) and significantly enhanced adjusted funds flow per share(a).
Our core Glacier/Valhalla assets continue to demonstrate resilience in a volatile commodities environment, with
highly efficient development drilling delivering the strongest operational outcomes in our 25-year history. Combined
with strong free cash flow ("FCF") (a) profiles from our Wembley and Charlie Lake liquids assets, our portfolio
simultaneously delivered disciplined production growth, debt reduction and enhanced operating netbacks.
Meanwhile, Advantage laid the foundation for several important milestones in 2026. A new 75 mmcf/d gas plant
will be commissioned at Progress in Q2 2026, and corporate production is expected to surpass 90,000 boe/d during
the second half of 2026. Production per share has nearly doubled in the last 4 years, while capital spending has
remained relatively stable.
2025 Financial Highlights
Cash provided by operating activities of $357.5 million.
Adjusted funds flow (“AFF”)(a) of $381.6 million or $2.29/share for Advantage(b).
Cash used in investing activities of $422.0 million, including both Advantage and Entropy.
Net capital expenditures(a) were $287.7 million for Advantage(b).
Net debt(a) of $549.1 million for Advantage(b), a reduction of $76.5 million from year-end 2024.
2025 Operating Highlights
Record annual average production of 78,267 boe/d (396.0 mmcf/d natural gas, 12,261 bbls/d liquids),
an increase of 10% over 2024.
Record liquids production of 12,261 bbls/d (7,991 bbls/d crude oil, 872 bbls/d condensate, and 3,398
bbls/d NGLs), an increase of 28% over 2024.
Proactively curtailed approximately 2,600 boe/d of dry natural gas (annualized) during times of very low
natural gas prices. These curtailments reduced depletion without impacting AFF(a), allowing deferral of
capital while supporting improved cash flow.
Delivered the top 9 Alberta Montney gas wells in 2025, based on IP90 rates and publicly available information.
This includes the most productive well ever drilled in the Alberta Montney(c), with an IP30 rate of 4,567 boe/d
(26.5 mmcf/d natural gas, 150 bbls/d NGLs).
Recycle ratios(a) were 1.7x, 2.1x and 1.9x for PDP, 1P and 2P, respectively, based on fourth quarter 2025
operating netback(a) of $15.99/boe.
Succeeded in shedding certain inherited midstream processing contracts, reducing unit operating costs.
Subsequent to year-end, closed a non-producing asset divestiture for cash proceeds of $12 million.
2025 Reserves Highlights
Proved Developed Producing ("PDP") reserves increased 1%, with finding and development ("F&D")(a) costs
of $9.36/boe, reflecting temporarily elevated spending on construction of the Progress Gas Plant and pre-
drilling wells in advance of the planned production increase in the second half of 2026.
Net present value of PDP reserves of $1.4 billion (before tax, 10% discount rate) or $8.21/share(a).
Total Proved ("1P") reserves increased 1%, with F&D(a) costs of $7.68/boe.
Net present value of 1P reserves of $2.8 billion (before tax, 10% discount rate) or $16.85/share(a).
Proved plus Probable ("2P") reserves increased 1%, with F&D(a) costs of $8.58/boe.
Net present value of 2P reserves of $4.1 billion (before tax, 10% discount rate) or $24.83/share(a).
PDP reserve additions replaced(a) 106% of production. Lower future development costs, combined with growing
reserve volumes, demonstrate continued improvements in capital efficiency.
Advantage Energy Ltd. - 3
Marketing Update
Advantage has continued to advance our long-term strategy of minimizing exposure to AECO volatility. We have
hedged approximately 34% of forecasted natural gas production in 2026, 20% in 2027 and 12% in 2028, and
approximately 38% of forecasted crude oil and condensate production in 2026 and 5% in 2027.
Physical market diversification efforts have advanced as well, selling 22,500 GJ/d to the Ventura market under a
seven-year term commencing April 1, 2029 and 10,000 mmbtu/d to the Dawn market under a ten-year term
commencing April 1, 2027. Since the beginning of 2025, Advantage has added nearly 60,000 GJ/d of long-term
physical transportation service to downstream markets, providing diversification away from volatile AECO markets.
Looking Forward
Advantage will continue to allocate substantially all FCF toward debt reduction until we achieve our target range,
currently set at $400 million to $500 million (approximately 1x debt to AFF(a)). We expect to achieve this target
during the second half of 2026, at which point we will balance further debt reduction with opportunistic share
buybacks, consistent with our capital allocation framework.
Advantage’s 2026 drilling program is Glacier-focused, delivering production growth of approximately 6% and DCET(d)
capital efficiencies trending below $8,000/boe/d. Thanks to continued strong well performance, the Corporation
announced on February 12, 2026 a reduction of approximately $20 million to its 2026 capital program (now $280
million to $310 million), with unchanged production guidance. Year-to-date production is ahead of budget,
averaging approximately 81,000 boe/d (85% natural gas).
Following commissioning of the Progress gas plant and the turnaround at the Glacier gas plant in Q2 2026,
Advantage expects to enter a period of highly efficient capital spending and escalating free cash flow. Operating
costs per boe are expected to fall as production will increasingly be processed through owned and operated gas
plant capacity. Beginning in Q3 2026, corporate production is expected to average approximately 90,000 boe/d and
remain stable through the end of 2027.
Development programs beyond 2027 are expected to remain efficient, in part due to our expandable Progress gas
plant and our idle Caribou/Conroy gas plant in northeast British Columbia. However, material investments in new
infrastructure will only be considered if supported by future supply and demand fundamentals.
Construction of Entropy’s Glacier CCS phase 2 project is expected to be completed in mid-2026, substantially
decarbonizing the Glacier facility and driving a step change in Entropy’s operating income from contractually
guaranteed carbon pricing. The $200 million project is funded entirely by Entropy’s partners, Brookfield and Canada
Growth Fund. Advantage congratulates the entire Entropy team on this significant advancement, the first of its kind
in the world.
(a)
Specified financial measure which is not a standardized measure under International Financial Reporting Standards (“IFRS”) and may
not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures" for the
composition of such specified financial measure, an explanation of how such specified financial measure provides useful information
to a reader and the purposes for which Management of Advantage uses the specified financial measure, and where required, a
reconciliation of the specified financial measure to the most directly comparable IFRS measure.
(b)
“Advantage” refers to Advantage Energy Ltd. only and excludes its subsidiary Entropy Inc.
(c)
Production information in this annual report is based on publicly available provincial production data reported to the Alberta Energy
Regulator ("AER") through Petrinex.
(d)
DCET is the net capital expenditures required to drill, complete, equip and tie-in a well.
Advantage Energy Ltd. - 4
RESERVES
Advantage engaged its independent qualified reserves evaluator McDaniel & Associates Consultants Ltd.
("McDaniel") to evaluate its year-end reserves as of December 31, 2025, in accordance with National Instrument
51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), and the Canadian Oil and Gas Evaluation
Handbook ("COGE Handbook").
Reserves and production information included herein is stated on a gross working interest basis (before royalty
burdens and excluding royalty interests) unless noted otherwise. Certain tables may not add due to rounding. In
addition to the information disclosed in this annual report, more detailed information on Advantage’s oil and gas
reserves, including its reserves on a net interest basis (after royalty burdens and including royalty interests) is
included in Advantage's Annual Information Form dated March 5, 2026 and is available at www.advantageog.com
and www.sedarplus.ca.
Highlights – Gross Working Interest Reserves
December 31
2025
December 31
2024(1)
Reserves (mboe)
Proved Developed Producing
173,377
171,916
Proved
476,687
474,217
Proved Plus Probable
689,157
685,602
Net Present Value of Future Net Revenue discounted at 10%, before tax ($000)
Proved Developed Producing
1,370,848
1,439,823
Proved
2,813,282
3,000,942
Proved Plus Probable
4,144,784
4,422,721
Finding and Development Costs ($ per boe, including FDC)(2)
Proved Developed Producing
9.36
8.48
Proved
7.68
9.39
Proved Plus Probable
8.58
6.87
Reserve Life Index (years)(2)
Proved Developed Producing
6.0
6.1
Proved
16.4
16.9
Proved Plus Probable
23.7
24.4
(1)
Reserves and net present value of future net revenues are based upon an evaluation by McDaniel with an effective date of December
31, 2024 contained in a report from McDaniel dated February 13, 2025 using the IQRE (as defined herein) average product price forecast
effective January 1, 2025.
(2)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures.
Advantage Energy Ltd. - 5
Corporation Gross (before royalties) Working Interest Reserves Summary as at December 31, 2025
Light &
Medium
Crude Oil
(Mbbls)
Conventional
Natural Gas
(MMcf)
Shale Gas
(MMcf)
Natural
Gas Liquids
(Mbbls)
Total Oil
Equivalent
(Mboe)
Proved
Developed Producing
10,278
91,113
828,557
9,821
173,377
Developed Non-producing
249
1,043
45,207
387
8,344
Undeveloped
20,454
125,270
1,395,775
21,003
294,965
Total Proved
30,981
217,426
2,269,538
31,212
476,687
Probable
17,006
118,576
970,877
13,888
212,470
Total Proved Plus Probable
47,987
336,002
3,240,416
45,100
689,157
(1) Reserves based upon an evaluation by Sproule ERCE with an effective date of December 31, 2023 contained in a report from Sproule
dated March 1, 2024 using the IQRE average product price forecast effective January 1, 2024.
(2) Reserves based upon an evaluation by McDaniel & Associates Consultants Ltd with an effective date of December 31, 2024 contained in
a report from McDaniels dated February 13, 2025 using the IQRE average product price forecast effective January 1, 2025.
608,878
685,602
689,157
2023(1)
2024(2)
2025
(Mboe)
Total Oil Equivalent Corporation Gross (before royalties)
Working Interest Reserves Summary
Proved Developed Producing
Proved Developed Non-producing
Proved Undeveloped
Probable
Total Proved Plus Probable
Advantage Energy Ltd. - 6
Corporation Net Present Value of Future Net Revenue using IQRE Average price and cost forecasts
(1)(2)(3)
Before Income Taxes Discounted at
($000)
0%
10%
15%
Proved
Developed Producing
2,116,347
1,370,848
1,161,196
Developed Non-producing
135,585
65,083
51,323
Undeveloped
3,979,415
1,377,351
893,676
Total Proved
6,231,346
2,813,282
2,106,195
Probable
4,077,454
1,331,502
916,486
Total Proved Plus Probable
10,308,800
4,144,784
3,022,680
(1) Advantage's light crude oil and medium crude oil, conventional natural gas, shale gas and natural gas liquid reserves were evaluated
using the average of the forecasts ("IQRE Average Forecast") prepared by McDaniel & Associates Consultants Ltd., GLJ Petroleum
Consultants and Sproule ERCE January 1, 2026, prior to the provision for income taxes, interests, debt services charges and general and
administrative expenses. It should not be assumed that the discounted future net revenue estimated by McDaniel represents the fair
market value of the reserves.
(2) Assumes that development of reserves will occur, without regard to the likely availability to the Corporation of funding required for that
development.
(3) Future Net Revenue incorporates Managements' estimates of required abandonment and reclamation costs, including expected timing
such costs will be incurred, associated with all wells, facilities and infrastructure.
2,951
3,001
2,813
1,278
1,422
1,332
4,229
4,423
4,145
2023
2024
2025
($ millions)
Net Present Value of Future Net Revenue
Before Income Taxes Discounted at 10%
Total Proved
Probable
Total Proved Plus Probable
Advantage Energy Ltd. - 7
IQRE Average Forecasts and Assumptions
The net present value of future net revenue at December 31, 2025 was based upon light and medium oil,
conventional natural gas, shale gas and natural gas liquid pricing assumptions, which was computed by using the
IQRE Average Forecast effective January 1, 2026. These forecasts are adjusted for reserves quality, transportation
charges and the provision of any applicable sales contracts. The price assumptions used over the next seven years
are summarized in the table below:
Year
Edmonton
Light Sweet
Crude Oil 40o
API
($Cdn/bbl)
AECO-C
Spot
($Cdn/MMbtu)
Edmonton
Cond. &
Natural
Gasolines
($Cdn/bbl)
Edmonton
Butane
($Cdn/bbl)
Edmonton
Propane
($Cdn/bbl)
Operating
Cost Inflation
Rate
%/year
Capital Cost
Inflation Rate
%/year
Exchange
Rate
($US/$Cdn)
2026
77.54
3.00
80.01
36.95
25.10
-
-
0.73
2027
83.60
3.30
86.19
39.79
27.28
2.00
2.00
0.74
2028
90.17
3.49
92.83
42.87
29.67
2.00
2.00
0.74
2029
92.32
3.58
95.04
43.89
30.37
2.00
2.00
0.74
2030
94.17
3.65
96.94
44.77
30.98
2.00
2.00
0.74
2031
96.06
3.72
98.89
45.66
31.60
2.00
2.00
0.74
2032
97.98
3.80
100.86
46.58
32.23
2.00
2.00
0.74
2033
99.93
3.88
102.88
47.51
32.87
2.00
2.00
0.74
2034
101.93
3.95
104.94
48.46
33.53
2.00
2.00
0.74
2035
103.97
4.03
107.04
49.43
34.20
2.00
2.00
0.74
2036
106.05
4.11
109.18
50.42
34.89
2.00
2.00
0.74
Thereafter
+2%/year
+2%/year
+2%/year
+2%/year
+2%/year
2.00
2.00
0.74
Advantage Energy Ltd. - 8
Company Gross (before royalties) Working Interest Reserves Reconciliation
FACTORS
Light Crude
Oil and
Medium
Crude Oil
(Mbbls)
Conventional
Natural Gas
(MMcf)
Shale Gas
(MMcf)
Natural Gas
Liquids(5)
(Mbbls)
Total Oil
Equivalent
(Mboe)
GROSS TOTAL PROVED
December 31, 2024
33,692
223,399
2,222,396
32,892
474,217
Extensions and improved recovery (1)
2,886
24,463
143,125
2,140
32,957
Technical revisions (2)
(1,400)
(301)
30,551
(1,988)
1,653
Discoveries
-
-
-
-
-
Acquisitions
-
-
-
-
-
Dispositions (3)
(109)
(1,219)
-
(70)
(382)
Economic factors (4)
(1,171)
(7,232)
(3,663)
(203)
(3,191)
Production
(2,917)
(21,683)
(122,870)
(1,559)
(28,568)
December 31, 2025
30,981
217,426
2,269,538
31,212
476,687
GROSS TOTAL PROBABLE
December 31, 2024
15,671
102,282
984,922
14,513
211,385
Extensions and improved recovery (1)
1,915
16,675
11,733
987
7,636
Technical revisions (2)
(1,187)
(3,007)
(27,441)
(1,668)
(7,930)
Discoveries
-
-
-
-
-
Acquisitions
-
-
-
-
-
Dispositions (3)
(22)
(297)
-
(16)
(88)
Economic factors (4)
630
2,924
1,664
72
1,466
Production
-
-
-
-
-
December 31, 2025
17,006
118,576
970,877
13,888
212,470
GROSS TOTAL PROVED PLUS PROBABLE
December 31, 2024
49,363
325,681
3,207,317
47,406
685,602
Extensions and improved recovery (1)
4,801
41,138
154,859
3,127
40,593
Technical revisions (2)
(2,587)
(3,308)
3,110
(3,656)
(6,276)
Discoveries
-
-
-
-
-
Acquisitions
-
-
-
-
-
Dispositions (3)
(131)
(1,517)
-
(86)
(470)
Economic factors (4)
(542)
(4,309)
(2,000)
(131)
(1,725)
Production
(2,917)
(21,683)
(122,870)
(1,559)
(28,568)
December 31, 2025
47,987
336,002
3,240,416
45,100
689,157
(1) Extensions and improved recovery: Reserves were added from 25.5 net wells brought on production concurrent with Advantage’s 2025 capital program.
(2) Technical revisions: Total technical revisions are largely driven by adjustments to Glacier liquid yield recovery and shrinkage estimates and rescheduling
of locations due to deferrals in the Wembley Montney area.
(3) Minor reserves were removed related to the sale of non-core assets in 2025.
(4) Economic factors: Changes in forecast pricing for both crude oil and natural gas resulted in minor, negative impact to total reserves. Less than one per
cent of total proved and total proved plus probable reserves were removed due to changes in forecast pricing.
(5) Natural gas liquids include condensate.
Advantage Energy Ltd. - 9
Company 2025 F&D Cost – Gross (before royalties) Working Interest Reserves Including Future
Development Capital(1)(2)(3)
PDP
1P
2P
Advantage net capital expenditures ($000)(4)
287,698
287,698
287,698
Acquisitions & dispositions ($000)
2,700
2,700
2,700
Net change in FDC ($000)
(5,904)
(49,136)
(10,817)
Total capital ($000)
284,494
241,262
279,581
Total Mboe, end of year
173,377
476,687
689,157
Total Mboe, beginning of year
171,916
474,217
685,602
Acquisitions & dispositions, Mboe
(382)
(382)
(469)
Production, Mboe
(28,568)
(28,568)
(28,568)
Reserve additions, Mboe
30,310
31,420
32,592
2025 F&D costs ($/boe) (4)
$ 9.36
$ 7.68
$ 8.58
2024 F&D costs ($/boe) (4)
$ 8.48
$ 9.39
$ 6.87
Three-year average F&D costs ($/boe) (4)
$ 8.44
$ 8.51
$ 7.82
Company 2025 FD&A Costs – Gross (before royalties) Working Interest Reserves including Future
Development Capital(1)(2)(3)
PDP
1P
2P
Advantage net capital expenditures ($000)(4)
287,698
287,698
287,698
Net change in FDC ($000)
(5,904)
(49,136)
(10,817)
Total capital ($000)
281,794
238,562
276,881
Total Mboe, end of year
173,377
476,687
689,157
Total Mboe, beginning of year
171,916
474,217
685,602
Production, Mboe
(28,568)
(28,568)
(28,568)
Reserve additions, Mboe
30,029
31,038
32,123
2025 FD&A costs ($/boe) (4)
$ 9.38
$ 7.69
$ 8.62
2024 FD&A costs ($/boe) (4)
$ 14.87
$ 17.11
$ 13.30
Three-year average FD&A costs ($/boe) (4)
$ 11.39
$ 12.80
$ 11.23
(1) F&D and FD&A costs are calculated by dividing total capital by reserve additions during the applicable period. Total capital includes both
capital expenditures incurred and changes in FDC required to bring the proved undeveloped and probable undeveloped reserves to
production during the applicable period. Reserves additions are calculated as the change in reserves from the beginning to the ending of
the applicable period excluding production. F&D excludes the impact of acquisitions and dispositions while FD&A includes the impact of
acquisitions and dispositions.
(2) The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in
estimated FDC generally will not reflect total finding and development costs related to reserves additions for that year. Changes in forecast
FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect
McDaniel’s best estimate of what it will cost to bring the proved undeveloped and probable undeveloped reserves on production.
(3) The change in FDC is primarily from incremental undeveloped locations.
(4) Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
Advantage Energy Ltd. - 10
CONSOLIDATED MANAGEMENT’S DISCUSSION & ANALYSIS
For the three months and years ended December 31, 2025 and 2024
Advantage Energy Ltd. - 11
CONSOLIDATED MANAGEMENT’S DISCUSSION & ANALYSIS
The following Management’s Discussion and Analysis ("MD&A"), dated as of March 5, 2026, provides a detailed
explanation of the consolidated financial and operating results of Advantage Energy Ltd. ("Advantage", the
"Corporation", "us", "we" or "our") for the three months and year ended December 31, 2025 and should be read in
conjunction with the December 31, 2025, audited consolidated financial statements. The consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS Accounting Standards" or "IFRS"), representing generally accepted
accounting principles ("GAAP") for publicly accountable enterprises in Canada. All references in the MD&A and
consolidated financial statements are to Canadian dollars unless otherwise indicated. All dollar per boe figures
include the results of Advantage’s natural gas and liquids operations and exclude the results of Entropy Inc.
("Entropy").
This MD&A contains specified financial measures such as non-GAAP financial measures, non-GAAP ratios, capital
management measures, supplementary financial measures and forward-looking information. Readers are advised
to read this MD&A in conjunction with both the "Specified Financial Measures" and "Forward-Looking Information
and Other Advisories" sections found at the end of this MD&A.
Advantage Energy Ltd. - 12
Financial Highlights
Three months ended
December 31
Year ended
December 31
($000, except as otherwise indicated)
2025
2024
2025
2024
Consolidated Financial Statement Highlights
Natural gas and liquids sales
181,796
163,477
698,984
543,295
Net income and comprehensive income (4)
9,616
17,130
53,051
21,719
per basic share (2)
0.06
0.10
0.32
0.13
per diluted share (2)
0.06
0.10
0.31
0.13
Basic weighted average shares (000)
166,941
166,974
166,978
163,955
Diluted weighted average shares (000)
170,338
169,785
170,180
166,821
Cash provided by operating activities
74,357
56,350
357,490
217,533
Cash provided by financing activities
41,387
22,789
62,063
481,077
Cash used in investing activities
(116,477)
(71,202)
(421,964)
(697,725)
Segmented Financial Highlights (1)
Advantage Energy Ltd.
Adjusted funds flow
99,143
84,309
381,582
250,031
per basic share (2)
0.59
0.51
2.29
1.53
per diluted share (3)
0.57
0.50
2.24
1.50
Net capital expenditures
73,093
84,287
287,698
700,597
Free cash flow – surplus (deficit)
27,350
(11,399)
91,184
(16,713)
Bank indebtedness
412,993
470,424
412,993
470,424
Net debt
549,092
625,551
549,092
625,551
Entropy Inc.
Adjusted funds flow
(2,971)
(2,920)
(12,343)
(8,635)
per basic share (2)
(0.01)
(0.02)
(0.07)
(0.05)
per diluted share (3)
(0.01)
(0.02)
(0.07)
(0.05)
Net capital expenditures
44,488
14,875
131,198
36,314
Free cash flow - deficit
(42,811)
(17,795)
(113,724)
(44,949)
Net debt
257,596
92,898
257,596
92,898
(1)
Specified financial measures which are not standardized measures under IFRS and may not be comparable to similar specified financial
measures used by other entities. Please see "Specified Financial Measures" for the composition of such specified financial measures, an
explanation of how such specified financial measures provides useful information to a reader and the purposes for which Management
of Advantage uses the specified financial measures, and/or where required, a reconciliation of the specified financial measures to the
most directly comparable IFRS measures.
(2)
Based on basic and diluted weighted average shares outstanding, as applicable.
(3)
Based on adjusted diluted weighted average shares outstanding.
(4)
Net income and comprehensive income attributable to Advantage shareholders.
Advantage Energy Ltd. - 13
Operating Highlights (1)
Three months ended
December 31
Year ended
December 31
2025
2024
2025
2024
Operating
Production
Crude oil (bbls/d)
7,372
7,527
7,991
5,347
Condensate (bbls/d)
938
979
872
1,116
NGLs (bbls/d)
3,462
3,379
3,398
3,127
Total liquids (bbls/d)
11,772
11,885
12,261
9,590
Natural gas (Mcf/d)
408,307
389,331
396,036
367,965
Total production (boe/d)
79,823
76,774
78,267
70,918
Average realized prices (including realized derivatives)
Natural gas ($/Mcf)
3.31
2.46
2.94
2.20
Liquids ($/bbl)
72.82
87.84
79.53
85.02
Operating Netback ($/boe) (2)
Natural gas and liquids sales
24.76
23.14
24.47
20.93
Realized gains on derivatives
2.92
2.91
2.86
1.97
Processing and other income
0.08
0.11
0.11
0.21
Net sales of purchased natural gas
-
-
0.06
-
Royalty expense
(1.83)
(2.40)
(2.10)
(2.02)
Operating expense
(5.93)
(5.19)
(5.34)
(4.75)
Transportation expense
(4.01)
(3.77)
(4.07)
(3.90)
Operating netback
15.99
14.80
15.99
12.44
(1)
Operating highlights are for Advantage’s natural gas and liquids operations.
(2)
Specified financial measure which is not a standardized measure under IFRS and may not be comparable to similar specified financial
measures used by other entities. Please see "Specified Financial Measures" for the composition of such specified financial measure, an
explanation of how such specified financial measure provides useful information to a reader and the purposes for which Management
of Advantage uses the specified financial measure, and/or where required, a reconciliation of the specified financial measure to the most
directly comparable IFRS measure.
Advantage Energy Ltd. - 14
Corporate update
Advantage 2026 Guidance
On December 9, 2025, Advantage announced its 2026 budget (see news release dated December 9, 2025).
Advantage's 2026 capital program continues our focus on growing adjusted funds flow per share via high rate-of-
return development drilling. Our Glacier-focused program is expected to deliver production growth of
approximately 6% (or 11% excluding the impact of a major turnaround at our Glacier Gas Plant) in 2026. Following
the commissioning of the Progress Gas Plant and the Glacier Gas Plant turnaround in the second quarter of 2026,
second-half production is expected to average 90,000 boe/d (86% gas).
On February 12, 2026, Advantage announced a reduction to its 2026 capital program of approximately $20 million,
primarily through the deferral of the lowest rate-of-return wells within its drilling program. As a result of the
continued strong performance of recently drilled wells, the 2026 production guidance remains unchanged (see news
release dated February 12, 2026).
Advantage's free cash flow profile is weighted to the second half of 2026, with a capital-intensive spending profile
in the first quarter. As we approach our net debt target, debt reduction will remain our priority, while share
repurchases are expected to be layered in opportunistically.
The below table summarizes Advantage’s 2026 guidance as at February 12, 2026:
Forward Looking Information (1)
Original
Guidance
as at
December 9, 2025(3)
Revised
Guidance
as at
February 12, 2026(3)
Cash Used in Investing Activities ($ millions) (2)
300 to 330
280 to 310
Production
Total Production (boe/d)
81,000 to 85,000
81,000 to 85,000
Natural Gas (%)
84 to 86
84 to 86
Crude Oil and Condensate (%)
10 to 12
10 to 12
NGLs (%)
~4
~4
Expenses
Royalty Rate (%)
6 to 8
6 to 8
Operating Expense ($/boe) (4)
5.25 to 5.85
5.25 to 5.85
Transportation Expense ($/boe) (4)
3.95 to 4.45
3.95 to 4.45
G&A Expense ($/boe) (4)
0.70 to 0.90
0.70 to 0.90
Finance Expense ($/boe) (4)
1.15 to 1.35
1.15 to 1.35
(1) Forward-looking statements and information representing Management estimates. Please see "Forward-Looking Information and Other
Advisories".
(2) Cash Used in Investing Activities is the same as Net Capital Expenditures as no change in non-cash working capital is assumed between
years and other differences are immaterial.
(3) Guidance numbers are for Advantage Energy Ltd. only and exclude its subsidiary, Entropy Inc.
(4) $/boe are specified financial measures which may not be comparable to similar specified financial measures used by other entities. Please
see “Specified Financial Measures”.
Advantage Energy Ltd. - 15
Corporate Update (continued)
Advantage 2025 Guidance Comparison
The table below summarizes Advantage’s 2025 guidance as at October 28, 2025 and a comparison to 2025 actual
financial and operating results:
Forward Looking Information (1)(2)
Original
Guidance
as at
March 4, 2025(5)
Revised
Guidance
as at
August 6, 2025(6)
Revised
Guidance
as at
October 28, 2025(7)
2025
Actuals
Cash Used in Investing Activities ($ millions)
270 to 300
270 to 300
270 to 300
287.7(3)
Production
Total Production (boe/d)
80,000 to 83,000
80,000 to 83,000
78,100 to 79,100
78,267
Natural Gas (%)
84 to 85
84 to 85
84 to 85
84
Crude Oil and Condensate (%)
11 to 12
11 to 12
11 to 12
12
NGLs (%)
~4
~4
~4
4
Expenses
Royalty Rate (%)
8 to 10
8 to 10
8 to 10
8.6
Operating Expense ($/boe) (4)
5.20 to 5.90
4.95 to 5.30
4.95 to 5.30
$5.34
Transportation Expense ($/boe) (4)
3.95 to 4.25
3.95 to 4.25
3.95 to 4.25
$4.07
G&A Expense ($/boe) (4)
0.75 to 0.85
0.75 to 0.85
0.75 to 0.85
$0.81
Finance Expense ($/boe) (4)
1.50 to 1.95
1.50 to 1.95
1.50 to 1.95
$1.68
(1) Forward-looking statements and information representing Management estimates. Please see "Forward-Looking Information and Other
Advisories".
(2) Guidance numbers are for Advantage Energy Ltd. only and exclude its subsidiary, Entropy Inc.
(3) Cash Used in Investing Activities is the same as Net Capital Expenditures for the purposes of guidance as no change in non-cash working
capital is assumed between years and other differences are immaterial. The Corporation compares its guidance against Advantage’s net
capital expenditures for the year ended December 31, 2025.
(4) $/boe are specified financial measures which may not be comparable to similar specified financial measures used by other entities.
Please see “Specified Financial Measures”.
(5) See December 31, 2024 MD&A dated March 4, 2025.
(6) See June 30, 2025 MD&A dated August 6, 2025.
(7) See September 30, 2025 MD&A dated October 28, 2025. The Corporation proactively curtailed dry natural gas production in response to low
or negative AECO benchmark pricing which impacted annual production by 2,600 boe/d.
Our 2025 financial and operating results were substantially within guidance, reflecting the strength and
predictability of our assets, and the consistent execution of our team. Operating costs were just slightly above the
guidance range due to fixed operating expenses being absorbed over marginally lower volumes due to high line
pressures on the NGTL system and temporary production curtailments. Minor workover activity and modestly
higher costs from select non-operated assets also contributed to the increase.
Advantage Energy Ltd. - 16
Production
Three months ended
December 31
%
Year ended
December 31
%
Average Daily Production
2025
2024
Change
2025
2024
Change
Crude oil (bbls/d)
7,372
7,527
(2)
7,991
5,347
49
Condensate (bbls/d)
938
979
(4)
872
1,116
(22)
NGLs (bbls/d)
3,462
3,379
2
3,398
3,127
9
Total liquids (bbls/d)
11,772
11,885
(1)
12,261
9,590
28
Natural gas (Mcf/d)
408,307
389,331
5
396,036
367,965
8
Total production (boe/d)
79,823
76,774
4
78,267
70,918
10
Liquids (% of total production)
15
15
16
14
Natural gas (% of total production)
85
85
84
86
For the three months and year ended December 31, 2025, Advantage's total production averaged 79,823 and 78,267
boe/d, increases of 4% and 10%, respectively, compared to the same periods in 2024. Fourth quarter production
growth reflected continued development across our Montney and Charlie Lake assets, with 9.5 net wells brought on
production. For the full year, production growth was driven by the successful integration of the high-quality Charlie
Lake and Montney assets acquired in June 2024 (the "Acquired Assets"), with 2025 representing the first full year of
contribution and delivering a meaningful uplift to both natural gas and liquids production.
Natural gas production for the three months and year ended December 31, 2025 averaged 408.3 and 396.0 MMcf/d,
respectively, increases of 5% and 8%, respectively, compared to the same periods in 2024. The quarterly increase
was attributable to 6.0 net Montney wells brought on stream while the annual increase reflects contributions from
the Acquired Assets and continued development at Glacier and Valhalla, including 13.0 net Montney wells brought
onstream (see "Cash Used in Investing Activities and Net Capital Expenditures").
Liquids production for the three months and year ended December 31, 2025, averaged 11,772 bbls/d and 12,261
bbls/d, a decrease of 1% for the quarter and an increase of 28% for the full year. The increase for 2025 was primarily
driven by a full-year of production from the Acquired Assets.
Advantage expects 2026 annual production to average between 81,000 and 85,000 boe/d based on our planned
2026 capital program and subject to natural gas pricing (see "Advantage 2026 Guidance").
6,452
7,141
12,820
11,885
13,273
11,879
12,139
11,772
357
356
369
389
423
397
356
408
0
50
100
150
200
250
300
350
400
450
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Q1 24
Q2 24
Q3 24
Q4 24
Q1 25
Q2 25
Q3 25
Q4 25
MMcf/d
bbls/d
Average Daily Production
Liquids (bbls/d)
Natural gas (MMcf/d)
Advantage Energy Ltd. - 17
Commodity Prices and Marketing
Three months ended
December 31
%
Year ended
December 31
%
Average Realized Prices (2)
2025
2024
Change
2025
2024
Change
Natural gas
Excluding derivatives ($/Mcf)
2.91
2.03
43
2.50
1.87
34
Including derivatives ($/Mcf)
3.31
2.46
35
2.94
2.20
34
Liquids
Crude oil ($/bbl)
75.60
93.92
(20)
84.64
95.50
(11)
Condensate ($/bbl)
78.20
95.02
(18)
86.73
97.25
(11)
NGLs ($/bbl)
45.24
55.11
(18)
50.52
57.05
(11)
Total liquids excluding derivatives ($/bbl)
66.88
82.98
(19)
75.34
83.17
(9)
Total liquids including derivatives ($/bbl)
72.82
87.84
(17)
79.53
85.02
(6)
Average Benchmark Prices
Natural gas (1)
AECO daily ($/Mcf)
2.23
1.48
51
1.68
1.46
15
Empress daily ($/Mcf)
2.46
1.59
55
1.88
1.51
25
Henry Hub ($US/MMbtu)
3.55
2.42
47
3.43
2.25
52
Emerson daily ($US/MMbtu)
2.33
1.55
50
1.85
1.39
33
Dawn daily ($US/MMbtu)
3.45
2.23
55
3.24
1.96
65
Chicago Citygate ($US/MMbtu)
3.25
2.33
39
3.19
2.13
50
Liquids
WTI ($US/bbl)
59.14
70.26
(16)
64.77
75.71
(14)
MSW Edmonton ($/bbl)
76.57
94.88
(19)
85.59
97.64
(12)
Average Exchange rate ($US/$CAD)
0.7170
0.7149
-
0.7157
0.7301
(2)
(1) Converted on the basis of 1 Mcf = 1.055056 GJ and 1 Mcf = 1 MMbtu.
(2) Average realized prices are considered specified financial measures which may not be comparable to similar specified financial measures
used by other entities. Please see "Specified Financial Measures".
Natural gas
Advantage’s realized natural gas prices excluding derivatives for the three months and year ended December 31,
2025, were $2.91/Mcf and $2.50/Mcf, respectively, representing increases of 43% and 34% compared to the same
periods in 2024. These improvements primarily reflected stronger benchmark pricing in markets where Advantage
has physical delivery and diversified market exposure. Eastern Canada and US natural gas benchmark prices
increased in 2025, supported by higher liquefied natural gas demand and a colder winter. In contrast, Alberta
markets remained weak throughout 2025 due to elevated production and inventory levels that built up ahead of
anticipated LNG Canada demand. Alberta pricing improved in the fourth quarter of 2025 relative to the prior year
quarter as market conditions became more balanced, whereas the fourth quarter of 2024 was characterized by
elevated inventories resulting from mild winter weather and supply ramp-ups ahead of LNG Canada. During the
third quarter of 2025, Advantage strategically curtailed production on days with particularly low or negative pricing,
preserving volumes for sale at stronger prices. On an annual basis, the impact of these strategic curtailments was
approximate 15.6 mmcf/d of natural gas production. On days with negative AECO pricing, Advantage also
opportunistically purchased spot gas to fulfill physical commitments while preserving the value of its natural gas
resource (see "Net Sales of Purchased Natural Gas").
Advantage Energy Ltd. - 18
Commodity Prices and Marketing (continued)
Advantage’s natural gas exposure consists of the AECO, Empress, Emerson, Dawn, and Chicago markets.
Additionally, the Corporation delivers 25,000 MMbtu/d under a long-term natural gas supply agreement and
receives a PJM electricity-based spark-spread price, less Alliance tolls. Advantage incurs additional transportation
expense to deliver production beyond AECO to the Empress, Emerson, Dawn and Chicago markets. Advantage
continues to pursue opportunities to diversify sales beyond Alberta markets to reduce exposure to local commodity
pricing and enhance operating netbacks, and such initiatives may impact transportation expense (see
"Transportation Expense").
The following table outlines the Corporation’s 2026 forward-looking natural gas market exposure, and actual natural
gas market exposure, excluding hedging.
Year ended
December 31, 2025
Forward-looking 2026 (2)
Sales Markets
Production
(MMcf/d) (1)
Percentage of Natural
Gas Production
(%)
Effective
production
(MMcf/d) (1)
Percentage of Natural
Gas Production
(%)
AECO
133.2
34%
209.5
49%
AECO Other (4)
48.7
13%
25.7
6%
Empress
88.4
22%
67.6
16%
Emerson
30.9
8%
26.8
6%
Dawn
52.7
13%
52.7
13%
Chicago
17.1
4%
16.0
4%
PJM electricity price (5)
25.0
6%
25.0
6%
Total
396.0
100%
423.3(3)
100%
(1)
All volumes contracted converted to Mcf on the basis of 1 Mcf = 1.055056 GJ and 1 Mcf = 1 MMbtu.
(2)
Natural gas market exposure based on contracts in-place at December 31, 2025.
(3)
Represents the midpoint of our 2026 guidance for natural gas production volumes (see "Advantage 2026 Guidance").
(4) Transactions that are priced at AECO but may include either a premium or discount to AECO as negotiated with counterparties.
(5)
Sales are based upon a spark-spread price, providing Advantage exposure to PJM electricity prices, back-stopped with a natural gas
price collar.
Liquids
Advantage’s realized liquids prices excluding derivatives for the three months and year ended December 31, 2025,
were $66.88/bbl and $75.34/bbl, respectively, declines of 19% and 9% compared to the same periods in 2024. The
decrease in realized prices across crude oil, condensate, and NGLs was primarily driven by elevated global supply
including increased OPEC+ production. Broader market dynamics also contributed to the pricing pressure, including
softening demand and demand concerns in key regions, evolving trade policies and tariffs, and seasonal
consumption shifts. The prices that Advantage receives for crude oil and condensate production are largely
influenced by global supply and demand fundamentals and the Edmonton light sweet oil and condensate price
differentials. Approximately 84% of our liquids production is comprised of crude oil, condensate and pentanes,
which typically command higher market prices than other NGLs. The quality of our liquids production has increased
significantly from the prior year due to the Acquired Assets.
Advantage Energy Ltd. - 19
Natural Gas and Liquids Sales
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Crude oil
51,273
65,036
(21)
246,880
186,896
32
Condensate
6,748
8,558
(21)
27,604
39,723
(31)
NGLs
14,408
17,133
(16)
62,663
65,289
(4)
Liquids
72,429
90,727
(20)
337,147
291,908
15
Natural gas
109,367
72,750
50
361,837
251,387
44
Natural gas and liquids sales
181,796
163,477
11
698,984
543,295
29
per boe
24.76
23.14
7
24.47
20.93
17
Natural gas and liquids sales for the three months ended December 31, 2025 totaled $181.8 million, an increase of
$18.3 million or 11% compared to the same period in 2024. This increase was driven by a 50% increase in natural
gas sales, which increased by $36.6 million due to a combination of 43% higher realized natural gas prices and a 5%
increase in production volumes (see "Commodity Prices and Marketing" and "Production"). In contrast, liquids sales
decreased by $18.3 million or 20%, due to a 19% reduction in realized liquids prices (see "Commodity Prices and
Marketing").
Natural gas and liquids sales totaled $699.0 million for the year ended December 31, 2025, representing an increase
of $155.7 million or 29%. Natural gas sales increased by $110.5 million or 44%, while liquids sales grew by $45.2
million or 15%. These gains were driven by an 8% increase in natural gas production and a 28% increase in liquids
volumes, largely attributable to the successful integration of the Acquired Assets (see "Production"). Additionally,
realized natural gas prices improved by 34%, while realized liquids prices declined by 9%, reflecting broader market
dynamics and global supply trends (see "Commodity Prices and Marketing").
65%
47%
29%
45%
54%
52%
36%
60%
35%
53%
71%
55%
46%
48%
64%
40%
$135.9
$104.1
$139.8
$163.5
$221.8
164.6
$130.8
$181.8
Q1 24
Q2 24
Q3 24
Q4 24
Q1 25
Q2 25
Q3 25
Q4 25
($ millions)
Natural Gas and Liquids Sales
Natural gas sales (% of Total)
Liquids sales (% of Total)
Total ($ millions)
Advantage Energy Ltd. - 20
Financial Risk Management
The Corporation’s financial results and condition are impacted primarily by the prices received for natural gas, crude
oil, condensate and NGLs production. Natural gas, crude oil, condensate and NGLs prices can fluctuate widely and
are determined by supply and demand factors, including available access to transportation, weather, general
economic conditions in consuming and producing regions and political factors. Additionally, certain commodity
prices are transacted and denominated in US dollars. Advantage has been proactive in commodity risk management
to reduce the volatility of cash provided by operating activities, supporting our organic development by diversifying
sales to different physical markets and entering into financial commodity and foreign exchange derivative contracts.
Advantage’s Credit Facilities (as defined herein) allow us to enter derivative contracts on up to 75% of total
estimated production over the first three years and up to 50% over the fourth and fifth years. In addition, the Credit
Facilities allow us to enter basis swap arrangements to any natural gas price point in North America for up to 100,000
MMbtu/d with a maximum term of seven years. Basis swap arrangements are excluded from hedged production
limits.
The Corporation enters into financial risk management derivative contracts to manage its exposure to commodity
price risk, foreign exchange risk and interest rate risk. A summary of realized and unrealized derivative gains and
losses for the three months and years ended December 31, 2025, and 2024 are as follows:
Three months ended
December 31
Year ended
December 31
2025
2024
2025
2024
Realized gains (losses) on derivatives
Natural gas
12,228
16,169
53,759
47,642
Crude oil
6,435
5,318
18,780
6,493
Foreign exchange
112
(179)
126
(101)
Natural gas embedded derivative
2,656
(728)
9,132
(2,907)
Total
21,431
20,580
81,797
51,127
Unrealized gains (losses) on derivatives
Natural gas
8,062
(14,278) (2,524)
4,496
Crude oil
(3,466)
(10,505) (4,693)
7,052
Foreign exchange
(136)
(1,461)
741
(1,634)
Natural gas embedded derivative
(23,491)
25,793 (36,203)
(4,733)
Unsecured debentures derivative
(927)
(68)
335
(866)
Total
(19,958)
(519) (42,344)
4,315
Gains (losses) on derivatives
Natural gas
20,290
1,891
51,235
52,138
Crude oil
2,969
(5,187)
14,087
13,545
Foreign exchange
(24)
(1,640)
867
(1,735)
Natural gas embedded derivative
(20,835)
25,065
(27,071)
(7,640)
Unsecured debentures derivative
(927)
(68)
335
(866)
Total
1,473
20,061
39,453
55,442
Advantage Energy Ltd. - 21
Financial Risk Management (continued)
Natural gas
For the three months and year ended December 31, 2025, Advantage realized gains on natural gas derivatives of
$12.2 million and $53.8 million, respectively, due to the settlement of derivative contracts with average prices that
were above average market prices.
Advantage recognized an unrealized gain on natural gas derivatives of $8.1 million and an unrealized loss of $2.5
million for the three months and year ended December 31, 2025, respectively. Unrealized gains and losses are a
result of changes in the fair value of outstanding natural gas derivative contracts accompanied with the settlement
of contracts in their respective periods. The change in the fair value of our outstanding natural gas derivative
contracts for the three-month period was due to a reduction in the forward price curve partially offset by the
settlement of contracts during the period. The unrealized loss for the year ended December 31, 2025 was primarily
due to the settlement of contracts during the period offset by new contracts entered during the year that have a
lower settlement price than the forward curve at December 31, 2025.
Crude oil
For the three months and year ended December 31, 2025, Advantage realized gains on crude oil derivatives of $6.4
million and $18.8 million, respectively, due to the settlement of contracts with average derivative contract prices
that were above average market prices.
Advantage recognized unrealized losses on crude oil derivatives of $3.5 million and $4.7 million for the three months
and year ended December 31, 2025, respectively. The change in the fair value of our outstanding crude oil derivative
contracts was primarily due to the settlement of contracts during the period.
Foreign exchange
For the three months and year ended December 31, 2025, Advantage realized a gain on foreign exchange derivatives
of $0.1 million for both periods, while recognizing an unrealized loss of $0.1 million and a gain of $0.7 million for the
three months and year ended December 31, 2025. The unrealized gains and losses are a result of the settlement of
contracts and change in the fair value during the period.
Natural gas embedded derivative
Advantage sells natural gas under a long-term natural gas supply agreement, delivering 25,000 MMbtu/d of natural
gas for a 10-year period ending in 2032. Commercial terms of the agreement are based upon a spark-spread pricing
formula, providing Advantage exposure to PJM electricity prices, back-stopped with a natural gas price collar. The
price for the host contract of the initial agreement is US$2.50 per MMbtu. In 2025, the Corporation extended the
term of the natural gas supply agreement by an additional 2.5 years, ending in 2035. Volumes delivered under the
additional term continue to be priced using the same spark-spread pricing formula, however, the natural gas price
collar does not apply to volumes delivered during this period. The price for the host contract of the extension
agreement is US$3.73 per MMbtu. The Corporation will realize gains or losses on the embedded derivative when
the realized settlement price differs from the host contract price, resulting in a realized gain of $2.7 million and $9.1
million for the three months and year ended December 31, 2025, respectively (three months and year ended
December 31, 2024 – realized loss of $0.7 million and $2.9 million). For the three months and year ended December
31, 2025, the Corporation recognized unrealized losses on its natural gas embedded derivative of $23.5 million and
$36.2 million, respectively. These losses were driven primarily by the extension of the natural gas supply agreement,
which was determined to have a host contract price of US$3.73 per MMBtu at the time the extension was executed.
Subsequent to the signing date, forward electricity prices declined, resulting in a reduction in the fair value of the
embedded derivative related to the extension period. The unrealized loss also reflects the decrease in the forward
price curve for electricity prices relative to December 31, 2024, as well as the passage of time during the period,
which resulted in a portion of the embedded derivative being realized through physical deliveries under the
contract.
Advantage Energy Ltd. - 22
Financial Risk Management (continued)
Unsecured debentures derivative
Entropy has issued and outstanding unsecured debentures that have exchange features that meet the definition of
a derivative liability, as the exchange features allow the unsecured debentures to be potentially exchanged for a
variable number of Entropy common shares (see "Unsecured Debentures"). The Corporation will record unrealized
gains or losses as the valuation of the conversion option changes. For the three months and year ended December
31, 2025, the Entropy unsecured debentures derivative liability resulted in an unrealized loss of $0.9 million and an
unrealized gain of $0.3 million, respectively, due to changes in the value of the conversion option.
The fair value of derivative assets and liabilities is the estimated value to settle the outstanding contracts as at a
point in time. As such, unrealized derivative gains and losses do not impact adjusted funds flow and the actual gains
and losses realized on eventual cash settlement can vary materially due to subsequent fluctuations in commodity
prices, foreign exchange rates and interest rates as compared to the valuation assumptions. Remaining derivative
contracts will settle between January 1, 2026 and March 31, 2029, apart from the natural gas embedded derivative,
which is expected to be settled between 2026 and 2035.
As at December 31, 2025 and March 5, 2026, the Corporation had the following commodity and foreign exchange
derivative contracts in place:
Description of derivative
Term
Volume
Price
Natural gas - AECO
Fixed price swap
January 2026 to March 2026
142,173 Mcf/d $3.54/Mcf
Fixed price swap
April 2026 to June 2026
94,782 Mcf/d $3.09/Mcf(1)
Fixed price swap
July 2026 to October 2026
108,999 Mcf/d
$3.01/Mcf(1)
Fixed price swap
November 2026 to March 2027
142,173 Mcf/d $3.29/Mcf(1)
Fixed price swap
April 2027 to October 2027
75,825 Mcf/d
$2.73/Mcf(1)
Fixed price swap
November 2027 to March 2028
71,086 Mcf/d
$2.87/Mcf(1)
Fixed price swap
April 2028 to October 2028
56,869 Mcf/d
$2.73/Mcf(1)
Fixed price swap
November 2028 to March 2029
47,391 Mcf/d
$2.66/Mcf(1)
Natural gas - Dawn
Fixed price swap
January 2026 to March 2026
28,435 Mcf/d
$4.65/Mcf
Fixed price swap
April 2026 to October 2026
28,435 Mcf/d
$4.52/Mcf
Fixed price swap
November 2026 to March 2027
9,478 Mcf/d
$4.25/Mcf
Crude oil – WTI NYMEX
Fixed price swap
January 2026
2,000 bbls/d US $62.67/bbl(1)
Fixed price swap
February 2026
3,000 bbls/d US $62.33/bbl(1)
Fixed price swap
March 2026
3,500 bbls/d US $62.56/bbl(1)
Fixed price swap
April 2026 to June 2026
4,500 bbls/d US $64.17/bbl(1)
Fixed price swap
July 2026 to December 2026
4,000 bbls/d US $63.62/bbl(1)
Fixed price swap
January 2027 to December 2027
500 bbls/d US $61.16/bbl(1)
(1)
Contains contracts entered into subsequent to December 31, 2025.
Advantage Energy Ltd. - 23
Processing and Other Income
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Advantage processing and other income
599
746
(20)
3,114
5,557
(44)
per boe
0.08
0.11
(27)
0.11
0.21
(48)
Entropy engineering services
95
875
(89)
2,720
1,250
118
Total processing and other income
694
1,621
(57)
5,834
6,807
(14)
Advantage earns processing income from contracts whereby the Corporation charges third-parties to utilize excess
capacity at its facilities. For the three months and year ended December 31, 2025, Advantage generated $0.6 million
and $3.1 million, respectively, in processing and other income, a decrease of 20% and 44% compared to the same
periods of the prior year. The decrease for the year is a result of less third-party throughput at the Glacier Gas Plant
as Advantage acquired production in 2024 that was previously being charged natural gas processing fees.
Entropy generated $2.7 million in other income for the year ended December 31, 2025, associated with front-end
engineering and design studies for third-parties.
Net Sales of Purchased Natural Gas
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Sales of purchased natural gas
-
-
nm
1,121
-
nm
Natural gas purchases
-
-
nm
556
-
nm
Net sales of purchased natural gas
-
-
nm
1,677
-
nm
per boe
-
-
nm
0.06
-
nm
During the third quarter of 2025, Advantage proactively curtailed natural gas production amid weak AECO prices.
On certain days, Advantage "purchased" spot gas at negative prices to meet physical commitments, effectively being
paid to take volumes for $0.6 million and selling into other markets for $1.1 million. This strategic approach allowed
Advantage to optimize its marketing portfolio to realize higher operating netbacks relative to AECO.
Royalty Expense
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Royalty expense
13,461
16,983
(21)
60,105
52,471
15
per boe
1.83
2.40
(24)
2.10
2.02
4
Royalty rate (%) (1)
7.4
10.4
(3.0)
8.6
9.7
(1.1)
(1) Percentage of natural gas and liquids sales.
Advantage pays royalties to the owners of mineral rights from which we have mineral leases. The Corporation has
mineral leases with provincial governments, individuals and other companies. Our current average royalty rates are
determined by various royalty regimes that incorporate factors including well depths, completion data, well
production rates, and commodity prices. Royalties also include the impact of Gas Cost Allowance ("GCA") which is a
reduction of royalties payable to the Alberta Provincial Government (the "Crown") to recognize capital and
operating expenditures incurred by Advantage in the gathering and processing of the Crown’s share of our natural
gas production.
Advantage Energy Ltd. - 24
Royalty Expense (continued)
Royalty expense decreased for the three-month period ended December 31, 2025, by $3.5 million, primarily due to
lower liquids sales resulting from lower liquids prices (see "Commodity Prices and Marketing"). This decrease was
partially offset by higher natural gas royalties associated with stronger natural gas prices and higher sales volumes;
however, natural gas generally attracts lower royalty rates than liquids.
Royalty expense increased for the year ended December 31, 2025, by $7.6 million due to higher natural gas and
liquids sales from higher production and higher benchmark natural gas prices, partially offset by lower liquids
benchmark prices (see "Production" and "Commodity Prices and Marketing").
Royalty rates for both the three months and year ended December 31, 2025, declined due to lower liquids
benchmark prices (see "Commodity Prices and Marketing").
Advantage expects royalty rates to range from 6% to 8% in 2026 (see "Advantage 2026 Guidance").
Operating Expense
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Advantage operating expense
43,544
36,677
19
152,466
123,226
24
per boe
5.93
5.19
14
5.34
4.75
12
Entropy operating expense
397
859
(54)
2,079
2,521
(18)
Operating expense
43,941
37,536
17
154,545
125,747
23
Operating expense for Advantage during the three months and year ended December 31, 2025, increased by $6.9
million and $29.2 million, respectively, increases of 19% and 24%. Operating expense per boe was $5.93/boe for the
fourth quarter and $5.34/boe for the year, both modestly higher than 2024 yet substantially close to our guidance
expectations. The higher fourth quarter operating expense per boe was primarily driven by the commencement of
third-party gas processing commitments and slightly lower production volumes caused by both high line pressures
on the NGTL system and early-October residual production curtailments due to low natural gas prices.
On an annual basis, the increase in operating expense was largely attributable to additional production from the
Acquired Assets, which are more liquids-weighted and generate stronger operating netbacks but also carry higher
operating costs per boe. Importantly, operating costs on the Acquired Assets have continued to outperform
expectations, supported by a reduction of more than 25% in operating costs per boe since Advantage assumed
operatorship.
Advantage expects 2026 annual operating expense per boe to be approximately $5.25 to 5.85 (see "Advantage 2026
Guidance").
Transportation Expense
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Natural gas
24,123
22,064
9
94,539
84,264
12
Liquids
5,336
4,568
17
21,848
16,875
29
Transportation expense
29,459
26,632
11
116,387
101,139
15
per boe
4.01
3.77
6
4.07
3.90
4
Transportation expense represents the cost of transporting our natural gas and liquids production to the sales
points, including associated fuel costs. Transportation expense for the three months and year ended December 31,
2025, increased by $2.8 million and $15.2 million, respectively, increases of 11% and 15%.
Advantage Energy Ltd. - 25
Transportation Expense (continued)
The increase in transportation expense for the quarter was due to higher fuel costs from higher benchmark prices
and increased natural gas production (see "Commodity Prices and Marketing" and "Production"). Transportation
increased for the year ended December 31, 2025, primarily due to a full year of production from the Acquired Assets
(see "Production"). Transportation expense per boe for the three-month and year ended December 31, 2025,
increased by 6% and 4%, respectively. The increase in transportation cost per boe was primarily due to higher toll
rates ("Production").
Advantage expects 2026 annual transportation expense per boe to be approximately $3.95 to $4.45/boe (see
"Advantage 2026 Guidance"). Advantage continues to pursue opportunities to diversify sales beyond Alberta
markets to reduce exposure to local commodity pricing and enhance operating netbacks, and such initiatives may
impact transportation expense.
Operating Income and Operating Netback
Three months ended
December 31
2025
2024
$000
per boe
$000
per boe
Natural gas and liquids sales
181,796
24.76
163,477
23.14
Realized gains on derivatives
21,431
2.92
20,580
2.91
Processing and other income
599
0.08
746
0.11
Royalty expense
(13,461)
(1.83)
(16,983)
(2.40)
Operating expense
(43,544)
(5.93)
(36,677)
(5.19)
Transportation expense
(29,459)
(4.01)
(26,632)
(3.77)
Operating income and operating netback (1)
117,362
15.99
104,511
14.80
Year ended
December 31
2025
2024
$000
per boe
$000
per boe
Natural gas and liquids sales
698,984
24.47
543,295
20.93
Realized gains on derivatives
81,797
2.86
51,127
1.97
Processing and other income
3,114
0.11
5,557
0.21
Net sales of purchased natural gas
1,677
0.06
-
-
Royalty expense
(60,105)
(2.10)
(52,471)
(2.02)
Operating expense
(152,466)
(5.34)
(123,226)
(4.75)
Transportation expense
(116,387)
(4.07)
(101,139)
(3.90)
Operating income and operating netback (1)
456,614
15.99
323,143
12.44
(1)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
Advantage Energy Ltd. - 26
Operating Income and Operating Netback (continued)
For the three months and year ended December 31, 2025, Advantage’s operating income increased by 12% and
41%, respectively, or $1.19/boe and $3.55/boe. The increase in operating netback per boe for the quarter was
primarily due to higher natural gas prices and lower royalty expense (see "Commodity Prices and Market", and
"Royalty Expense"), partially offset by higher operating expenses (see "Operating Expense") . The increase in
operating netback per boe for the year was primarily driven by higher natural gas and liquids sales, particularly from
increased liquids associated with the Acquired Assets (see "Production") and stronger natural gas prices (see
"Commodity Prices and Marketing"). These increases were further supported by realized gains on derivatives,
partially offset by higher operating expenses related to the Acquired Assets (see "Operating Expense").
During 2025, liquids production, while representing approximately 16% of total production volumes, contributed
approximately half of total operating income. This disproportionate contribution reflects the higher realized pricing
and operating netbacks associated with liquids production and highlights the importance of Advantage’s strategy to
increase liquids exposure, particularly during a period of weaker natural gas pricing.
General and Administrative Expense
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Advantage G&A
8,336
7,224
15
29,075
28,881
1
Capitalized
(2,463)
(1,777)
39
(5,952)
(6,863)
(13)
Advantage G&A expense
5,873
5,447
8
23,123
22,018
5
per boe
0.80
0.77
4
0.81
0.85
(5)
Entropy G&A expense
3,746 3,968
(6)
17,228
11,066
56
General and administrative expense
9,619
9,415
2
40,351
33,084
22
Employees at December 31
99
82
21
Advantage general and administrative ("G&A") expense for the three months and year ended December 31, 2025,
increased by $0.4 million and $1.1 million, respectively. G&A expense per boe, decreased for the year ended
December 31, 2025, due to higher volumes from a full year of production from the Acquired Assets as efficiencies
are realized (see "Production").
Entropy G&A expense incurred for the three months ended December 31, 2025, decreased by $0.2 million, while
for the year it increased by $6.2 million. The increase for the year is primarily attributable to expenditures incurred
for completing front-end engineering and design studies for emitters. These studies are undertaken with the
expectation that either Entropy and the emitters will subsequently approve a final investment decision for the
project, or Entropy will receive compensation for the studies (see "Processing and Other Income"). In addition,
Entropy has expanded its staffing levels to support ongoing business growth and operational scalability.
Advantage Energy Ltd. - 27
Share-based Compensation Expense
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Share-based compensation
1,527
252
nm
9,975
4,950
102
Capitalized
(272)
(41)
nm
(1,764)
(1,058)
67
Share-based compensation expense
1,255
211
nm
8,211
3,892
111
per boe
0.17
0.03
nm
0.29
0.15
93
Advantage’s long-term compensation plan for staff consists of a cash-based performance award incentive plan (see
"General and Administrative Expense") and a share-based Restricted and Performance Award Incentive Plan. Under
the Restricted and Performance Award Incentive Plan, service providers of Advantage are granted Performance
Share Units that vest over three years from grant date. Capitalized share-based compensation is attributable to staff
involved with the development of capital projects.
Advantage’s share-based compensation expense for the three months and year ended December 31, 2025,
increased by $1.0 million and $4.3 million, respectively. This increase reflects the unusually modest expense levels
in 2024, which were driven by a reduced performance multiplier, downward revisions to estimates for outstanding
Performance Share Units, and forfeitures related to employee retirements.
Finance Expense - Net
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Advantage interest expense
11,325
14,041
(19)
48,072
43,925
9
per boe
1.54
1.99
(23)
1.68 1.69
(1)
Advantage accretion expense
1,438
1,216
18
5,443
4,130
32
Advantage finance expense
12,763
15,257
(16)
53,515
48,055
11
Entropy finance expense
2,344
1,446
62
7,546
4,365
73
Finance expense - net
15,107
16,703
(10)
61,061
52,420
16
Advantage realized lower interest expense during the three months ended December 31, 2025, primarily due to
lower interest rates and decreased average outstanding bank indebtedness as compared to 2024. Advantage
realized higher interest expense during the year ended December 31, 2025, primarily due to financing of the
Acquired Assets in 2024 through a combination of bank indebtedness and convertible debentures. This increase was
offset by decreasing interest rates throughout 2025 and the continued trend of Advantage dedicating free cash flow
to reduce net debt. Interest on bank indebtedness is based on short-term loans plus fees and determined by net
debt to the trailing four quarters earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio as
calculated pursuant to our Credit Facilities (see "Bank Indebtedness, Credit Facilities and Working Capital").
Advantage recognized $1.8 million and $7.2 million of interest expense related to the convertible debentures and
incurred incremental associated accretion expense for the three months and year ended December 31, 2025, due
to the accounting treatment for convertible debentures (see "Convertible Debentures").
Entropy finance expense increased during the three months and year ended December 31, 2025, due to an increased
average outstanding aggregate principal amount of unsecured debentures associated with investors continued
financing of the ongoing Glacier Phase 2 CCS project and the acquisition of certain carbon hub assets in
Saskatchewan (see "Cash Used in Investing Activities and Net Capital Expenditures"). Entropy funds its projects by
issuing unsecured debentures to third-party investors with committed capital. The unsecured debentures are non-
recourse to Advantage, which does not provide any financing to Entropy for capital projects (see "Unsecured
Debentures").
Advantage Energy Ltd. - 28
Depreciation and Amortization Expense
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Advantage depreciation
54,862
52,428
5
223,606
194,583
15
per boe
7.47
7.42
1
7.83
7.50
4
Entropy depreciation and amortization
1,390
884
57
4,435
4,906
(10)
Depreciation and amortization expense
56,252
53,312
6
228,041
199,489
14
Depreciation and amortization expense increased for the three months and year ended December 31, 2025,
primarily due to higher production and a higher depreciation rate per boe (see "Production"). Depreciation and
amortization expense per boe increased compared to the prior year, reflecting the Acquired Assets, which carry a
higher depreciation rate per boe typical of liquids-weighted assets relative to the Corporation’s pre-existing natural
gas-weighted asset base.
Income Taxes
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Income tax expense
5,389
6,531
(17)
24,713
12,805
93
Effective tax rate (%)
37.5
28.1
9.4
32.6
38.9
(6.3)
Deferred income taxes arise from differences between the accounting and tax bases of our assets and liabilities. For
the three months and year ended December 31, 2025, the Corporation recognized a deferred income tax expense
of $5.4 million and $24.7 million, respectively. Income tax expense for three months and year ended December 31,
2025, is a result of net income before taxes and non-controlling interest of $14.4 million and $75.7 million,
respectively, combined with non-deductible share-based compensation expense, and valuation allowances applied
against Entropy’s non-capital losses. These tax adjustments can significantly impact the effective tax rate, resulting
in figures that may appear disproportionate relative to pre-tax income. As at December 31, 2025, the Corporation
had a deferred income tax liability of $277.9 million.
Advantage expects it will not be subject to cash taxes at current forward commodity prices until at least calendar
2029 due to over $1.7 billion in tax pools. The estimated tax pools available at December 31, 2025 are as follows:
($ thousands)
Canadian development expenses
304,978
Canadian exploration expenses
76,350
Canadian oil and gas property expenses
280,196
Non-capital losses
309,493
Undepreciated capital cost
528,578
Capital losses
135,369
Scientific research and experimental development expenditures
32,506
Other
29,622
1,697,091
Advantage Energy Ltd. - 29
Net Income and Comprehensive Income Attributable to Advantage Shareholders
Three months ended
December 31
%
Year ended
December 31
%
($000, except as otherwise indicated)
2025
2024
Change
2025
2024
Change
Net income and comprehensive income
attributable to Advantage shareholders
9,616
17,130
(44)
53,051
21,719
144
per basic share
0.06
0.10
(40)
0.32
0.13
146
per diluted share
0.06
0.10
(40)
0.31
0.13
138
Advantage recognized net income attributable to shareholders for the three months ended December 31, 2025, of
$9.6 million as compared to $17.1 million in the same period of 2024. For the year ended December 31, 2025, net
income attributable to shareholders increased significantly to $53.1 million from $21.7 million in the prior year. The
increase for the year ended was due to higher natural gas and liquids sales, reflecting increased production volumes
(see "Production") and stronger natural gas prices (see "Natural Gas and Liquids Sales"). These gains were partially
offset by costs typically associated with higher production, such as operating expense (see "Operating Expense")
and transportation expense (see "Transportation Expense").
Cash Provided by Operating Activities and Adjusted Funds Flow ("AFF")
Three months ended
December 31
Year ended
December 31
($000, except as otherwise indicated)
2025
2024
2025
2024
Cash provided by operating activities
74,357
56,350
357,490
217,533
Expenditures on decommissioning liability
941
2,071
5,052
3,059
Changes in non-cash working capital
20,874
22,968
6,697
20,804
Adjusted funds flow (1)
96,172
81,389
369,239
241,396
Advantage adjusted funds flow (1)
99,143
84,309
381,582
250,031
per basic share (1)
0.59
0.51
2.29
1.53
per diluted share (1)
0.58
0.50
2.24
1.50
per boe (1)
13.50
11.94
13.36
9.63
Entropy adjusted funds flow (1)
(2,971)
(2,920)
(12,343)
(8,635)
(1)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
Advantage Energy Ltd. - 30
Cash Provided by Operating Activities and Adjusted Funds Flow ("AFF") (continued)
(1)
The change in natural gas and liquids sales related to the change in production is determined by multiplying the prior period realized
price by the change in current period production.
(2)
Other includes processing and other income, the net impact of net sales of purchased natural gas, G&A expense, transaction cost, finance
expense (excluding accretion expense), foreign exchange gain and settlement of Performance Share Units in cash.
(3)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
For the three months and year ended December 31, 2025, the Corporation realized cash provided by operating
activities of $74.4 million and $357.5 million, representing year-over-year improvements of $18.0 million and $140.0
million, respectively. After adjusting for non-cash changes in working capital and expenditures on decommissioning
liability, adjusted funds flow was $96.2 million and $369.2 million for the respective periods, increases of $14.8
million and $127.8 million when compared to the same periods of 2024. The higher cash provided by operating
activities and adjusted funds flow for the quarter were largely impacted by higher natural gas prices and realized
gains on derivatives (see "Commodity Prices and Marketing" and"Financial Risk Management"), while the year was
additionally influenced by an increase in natural gas and liquids sales as a result of higher total production due to
the Acquired Assets (see "Production"), partially offset by higher costs associated with stronger commodity prices
and a more liquids-weighted production mix.
$241.4
$369.2
$18.4
$92.0
$80.3
35.0
$7.6
30.7
$15.2
$28.8
$7.0
($ millions)
Change in Adjusted Funds Flow(3)
(Year ended December 31, 2025)
Increase
Decrease
Advantage Energy Ltd. - 31
Cash Used in Investing Activities and Net Capital Expenditures
Three months ended
December 31
Year ended
December 31
($000)
2025
2024
2025
2024
Drilling, completions, equipping and tie-ins
57,045
72,366
215,819
174,559
Facilities and infrastructure
13,173
9,986
64,354
64,344
Corporate (2)
1,575
13,356
10,225
27,841
Exploration and development expenditures
71,793
95,708
290,398
266,744
Asset acquisitions
1,300
-
1,300
445,274
Asset dispositions
-
(11,421)
(4,000)
(11,421)
Net capital expenditures - Advantage
73,093
84,287
287,698
700,597
Carbon capture and storage facilities
39,400
14,663
100,393
35,179
Intangible assets
440
212
988
1,135
Asset acquisition
4,648
-
29,817
-
Net capital expenditures - Entropy
44,488
14,875
131,198
36,314
Net capital expenditures (1)
117,581
99,162
418,896
736,911
Changes in non-cash working capital
(1,104)
(27,960)
3,068
(39,186)
Cash used in investing activities
116,477
71,202
421,964
697,725
(1)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
(2)
Corporate includes workovers, turnaround cost, seismic, capitalized G&A, and office furniture and equipment.
(1)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
67%
47%
41%
65%
66%
44%
54%
51%
20%
37%
32%
9%
14%
25%
19%
12%
8%
4%
9%
12%
3%
4%
3%
1%
5%
13%
18%
13%
17%
27%
25%
36%
$80.1
$45.4
$66.7
$110.6
$118.0
$67.3
$94.9
$111.8
-
20.0
40.0
60.0
80.0
100.0
120.0
Q1 24
Q2 24
Q3 24
Q4 24
Q1 25
Q2 25
Q3 25
Q4 25
Millions
Net Capital Expenditures (Excluding Acquisitions & Dispositions)(1)
Drilling, completions, equipping, and tie-ins (% of total)
Facilities and infrastructure (% of total)
Corporate (% of total)
Net capital expenditures - Entropy (% of total)
Net capital expenditures ($000)
Advantage Energy Ltd. - 32
Cash Used in Investing Activities and Net Capital Expenditures (continued)
Advantage
Advantage incurred $71.8 million and $290.4 million on exploration and development expenditures during the three
months and year ended December 31, 2025, respectively. The following table summarizes wells drilled, completed
and on production for the three months and year ended December 31, 2025:
Three months ended
December 31, 2025
Year ended
December 31, 2025
Drilled
Completed
On production
Drilled
Completed On production
(# of wells)
Gross (Net)
Gross (Net)
Gross (Net)
Gross (Net)
Gross (Net)
Gross (Net)
Glacier
6 (5.6)
3
(3.0)
6 (6.0)
13 (12.6)
10 (10.0)
11 (11.0)
Valhalla
2 (2.0)
-
-
-
-
2 (2.0)
2
(2.0)
2 (2.0)
Wembley
-
-
-
-
-
-
3 (3.0)
3
(3.0)
3 (3.0)
Service wells
-
-
1
(1.0)
-
-
3 (3.0)
2
(2.0)
-
-
Montney
8 (7.6)
4
(4.0)
6 (6.0)
21 (20.6)
17 (17.0)
16 (16.0)
Valhalla
4 (4.0)
2
(2.0)
2 (2.0)
11 (9.6)
8
(6.5)
10 (8.5)
Progress
3 (1.5)
3
(1.5)
3 (1.5)
7 (3.5)
7
(3.5)
7 (3.5)
Gordondale
-
-
-
-
-
-
2 (2.0)
2
(2.0)
2 (2.0)
Charlie Lake
7 (5.5)
5
(3.5)
5 (3.5)
20 (15.1)
17 (12.0)
19 (14.0)
Total
15 (13.1)
9
(7.5)
11 (9.5)
41 (35.7)
34 (29.0)
35 (30.0)
Charlie Lake Assets
Valhalla/Progress/Gordondale
Activity on our Charlie Lake properties was steady during 2025, consisting of 20 gross (15.1 net) wells drilled, 17
gross (12.0 net) wells completed, and 19 gross (14.0 net) wells placed on production. Our Charlie Lake drilling
program continues to outperform our acquisition type curve which exceeds historical results from the asset.
During the first half of 2025, Advantage physically connected our main 16-29 Valhalla battery to the NorthRiver
Midstream Gordondale East plant. The plant expansion is now complete, and we are delivering up to 25 MMcf/d of
raw gas to the facility. This connection, combined with our extensive owned gas processing and liquid handling
infrastructure, provides sufficient processing capacity to ensure the efficient development of our Charlie Lake
properties.
Montney Assets
Glacier
During 2025, activity at our Glacier property consisted of 13 gross (12.6 net) wells drilled, 10 gross (10.0 net) wells
completed, and 11 gross (11.0 net) wells placed on production.
Well performance from the property continues to be strong and resilient. Of all Alberta Montney gas wells placed
on production in 2025, Advantage had the top 9 wells with all 11 wells in the top 20, based on IP90 rates.
Our first quarter of 2026 at Glacier is focused on preparing to add 50 MMcf/d gas to the Glacier Gas Plant. This
volume will replace gas from the Valhalla and Progress areas that are currently flowing to the Glacier Gas Plant and
will be redirected to our new Progress 4-21 gas plant following commissioning in the second quarter of 2026.
A new water disposal well was added during 2025 which will help maintain our low-cost structure.
Advantage Energy Ltd. - 33
Cash Used in Investing Activities and Net Capital Expenditures (continued)
Valhalla
During 2025, activity at our Valhalla property consisted of 2 gross (2.0 net) wells drilled, 2 gross (2.0 net) wells
completed, and 2 gross (2.0 net) wells placed on production.
The two new Montney wells were brought on production at restricted rates due to low gas prices and pipeline
constraints. The constraints will be removed when Valhalla gas is redirected to our new Progress 4-21 gas plant in
the second quarter of 2026. Well performance from the two wells was strong, achieving average production rates
over 30 consecutive of 10.9 MMcf/d raw natural gas despite being choked back significantly. Continued strong well
results support Management’s view that our Valhalla Montney asset will continue to play a pivotal role in our liquids-
rich gas development plan.
Three new wells from our 2026 program will be brought on production late in the first quarter of 2026.
Wembley
2025 activity at our Wembley property consisted of 3 gross (3.0 net) wells drilled, 3 gross (3.0 net) wells completed,
and 3 gross (3.0 net) wells placed on production. Average production rates over 30 consecutive days for these wells
were 1,074 boe/d (2.6 MMcf/d natural gas, 520 bbls/d crude oil and 123 bbls/d NGLs) resulting in a 60% liquid
content.
The Wembley asset is connected to two third-party gas processing facilities and utilizes existing capacity in our 100%
owned Wembley compressor site and liquids handling hub. The property remains a key contributor to our liquid-
rich portfolio of Montney assets.
Progress
At Progress, construction of the Phase 1 75 MMcf/d 4-21 gas plant was deferred to early 2026 with no impact on
2025 production, as excess processing capacity strategically acquired in 2024 was utilized, reducing 2025 capital
expenditures and increasing free cash flow by approximately $35 million.
Construction at the Progress 4-21 gas plant resumed in the fourth quarter of 2025 with commissioning taking place
in the second quarter of 2026. The acid gas disposal well that services the plant was drilled and completed during
the third quarter of 2025. All key regulatory components for the facility are in place.
The completion and commissioning of the Progress gas plant in the second quarter of 2026 will unlock significant
synergies and growth from our assets through regional infrastructure and production optimization, resulting in
lower operating costs and stronger operating netbacks. The Progress gas plant will also provide incremental
processing capacity for our next phase of low-cost production growth at Glacier.
Advantage Energy Ltd. - 34
Cash Used in Investing Activities and Net Capital Expenditures (continued)
Entropy
Net capital expenditures incurred by Entropy are funded through the issuance of unsecured debentures to investors
that have provided Entropy access to $500 million in committed capital, of which $230.0 million has been drawn
and $20.3 million has been paid-in-kind and added to the aggregate balance of outstanding debentures as at
December 31, 2025. Advantage does not provide any financing to Entropy for capital projects.
Entropy invested $44.5 million and $131.2 million in net capital expenditures during the three months and year
ended December 31, 2025, respectively. Entropy’s expenditures were primarily attributable to equipment and
construction costs of the ongoing Glacier Phase 2 CCS project. Additional expenditures included front-end
engineering and design studies for multiple prospective emitters and continued development of the Saskatchewan
carbon hub that was acquired in the third quarter of 2025 for cash consideration of $29.8 million comprised of a
$20.0 million purchase price and $9.8 million of closing adjustments.
On June 20, 2024, the carbon capture, utilization, and storage investment tax credit (“CCUS ITC”) included in Bill C-
59 received royal assent. Advantage and Entropy have incurred eligible carbon capture expenditures dating back to
January 1, 2022. The Corporation has received project approvals from Natural Resources Canada and is currently
working with the Canada Revenue Agency to finalize the determination of tax credit amounts for its existing carbon
capture projects at Glacier. These investment tax credits are not included in net capital expenditures and will be
recognized once final determinations are made by the Canada Revenue Agency.
Commitments and Contractual Obligations
The Corporation has commitments and contractual obligations in the normal course of operations. Such
commitments include operating costs for office leases, natural gas processing costs associated with third-party
facilities, and transportation costs for delivery of our natural gas and liquids production to sales points (crude oil,
condensate and NGLs). Transportation commitments are required to ensure our production is delivered to sales
markets and Advantage actively manages our portfolio in conjunction with our future development plans ensuring
we are properly diversified to multiple markets. Of our total transportation commitments, $516.7 million or 54% is
required for delivery of natural gas and liquids production to Alberta markets, while Advantage has proactively
committed to $433.7 million in additional transportation to diversify natural gas production to the Dawn, Empress,
Emerson, and Chicago markets, with the objective of reducing price volatility and achieving higher operating
netbacks (see "Transportation Expense"). Contractual obligations comprise those liabilities to third-parties incurred
for the purpose of financing Advantage’s business and development, including our bank indebtedness.
Advantage Energy Ltd. - 35
Commitments and Contractual Obligations (continued)
The following table is a summary of the Corporation’s remaining commitments and contractual obligations.
Advantage has no guarantees or off-balance sheet arrangements other than as disclosed.
Payments due by period
($ millions)
Total
2026
2027
2028
2029
2030
Beyond
Building operating cost (1)
1.4
0.8
0.6
-
-
-
-
Processing
130.5
22.4
20.3
18.8
16.2
10.9
41.9
Transportation
950.4
103.8
101.2
94.9
86.0
83.2
481.3
Total commitments
1,082.3
127.0
122.1
113.7
102.2
94.1
523.2
Performance Awards
5.6
1.9
2.8
0.9
-
-
-
Lease liability
3.2
1.5
1.1
0.5
0.1
-
-
Financing liability
123.9
13.0
13.0
13.1
13.0
13.0
58.8
Bank indebtedness (2)
- principal
415.0
-
415.0
-
-
-
-
- interest
35.0
23.3
11.7
-
-
-
-
Unsecured debentures (3)
- principal
254.4
-
-
-
-
4.1
250.3
- interest
173.9
20.6
20.6
20.6
20.6
20.5
71.0
Convertible debentures (4)
- principal
143.8
-
-
-
143.8
-
-
- interest
25.2
7.2
7.2
7.2
3.6
-
-
Total contractual obligations
1,180.0 67.5 471.4 42.3
181.1
37.6 380.1
Total future payments
2,262.3
194.5
593.5
156.0
283.3
131.7
903.3
(1) Excludes fixed lease payments which are included in the Corporation’s lease liability.
(2) As at December 31, 2025 the Corporation’s bank indebtedness was governed by the Credit Facilities, which have a two-year term with a
syndicate of financial institutions. The Credit Facilities are revolving and extendible for a further 364-day period upon an annual review
and at the option of the syndicate. If not extended, the Credit Facilities will mature with any outstanding principal payable at the end of
the two-year term (see "Bank Indebtedness, Credit Facilities and Working Capital").
(3) Entropy funds its capital projects by issuing unsecured debentures to third-party investors with committed capital. The unsecured
debentures are non-recourse to Advantage, which does not provide any financing to Entropy for capital projects. The principal balance of
unsecured debenture bears an interest rate of 8% for the convertible unsecured debentures, which can be paid-in-kind (subject to certain
limitations) or cash, at the discretion of Entropy (see "Unsecured Debentures"). Entropy may fund certain other non-project expenditures
by issuing non-convertible unsecured debentures to third-party investors. The principal balance of the non-convertible unsecured
debentures bears an interest rate of 15%, which can be paid-in-kind or cash, at the discretion of Entropy.
(4) The convertible debentures have a maturity date of June 30, 2029 and a coupon rate of 5% payable semi-annually.
Advantage Energy Ltd. - 36
Liquidity and Capital Resources
The following table is a summary of the Corporation’s capitalization structure:
($000, except as otherwise indicated)
December 31
2025
December 31
2024
Bank indebtedness
412,993
470,424
Convertible debentures(1)
143,750
143,750
Working capital (surplus) deficit
(7,651)
11,377
Net debt attributable to Advantage
549,092
625,551
Unsecured debentures(2)
254,421
101,000
Working capital (surplus) deficit
3,175
(8,102)
Net debt attributable to Entropy
257,596
92,898
Net debt(3)
806,688
718,449
Shares outstanding
166,941,610
166,931,440
Shares closing market price ($/share)
11.74
9.86
Market capitalization
1,959,895
1,645,944
Total capitalization
2,766,583
2,364,393
(1)
The convertible debentures have a maturity date of June 30, 2029 and a coupon rate of 5% payable semi-annually.
(2)
Entropy funds its capital projects by issuing unsecured debentures to third-party investors with committed capital. The unsecured
debentures are non-recourse to Advantage, which does not provide any financing to Entropy for capital projects. The aggregate principal
balance of unsecured debenture bears an annual interest rate of 8%, which can be paid-in-kind (subject to certain limitations) or cash,
at the discretion of Entropy (see "Unsecured Debentures"). Entropy may fund certain other non-project expenditures by issuing non-
convertible unsecured debentures to third-party investors. The principal balance of the non-convertible unsecured debentures bears an
interest rate of 15%, which can be paid-in-kind or cash, at the discretion of Entropy.
(3)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
As at December 31, 2025, the Corporation had net debt of $806.7 million, consisting of $549.1 million with
Advantage and $257.6 million with Entropy. Advantage has generated $91.2 million of free cash flow during the
year ended December 31, 2025, allowing Advantage to reduce net debt by $76.5 million. Advantage has a $650
million Credit Facility of which $226.6 million or 35% was available after deducting outstanding letters of credit of
$8.4 million (see "Bank Indebtedness, Credit Facilities and Working Capital"). Debt to adjusted funds flow ratio
excluding Entropy was 1.4. Advantage remains committed to its strategy of debt reduction and continues to make
meaningful progress. This trajectory reflects the Corporation’s disciplined financial strategy, supported by strong
free cash flow generation and selective non-core asset dispositions.
Entropy net debt increased $164.7 million from December 31, 2024, due to drawing $139.0 million of unsecured
debentures (see "Unsecured Debentures") and adding paid-in-kind interest of $14.4 million to the aggregate balance
of the unsecured debentures, which were used to fund $131.2 million of net capital expenditures for the year ended
December 31, 2025 (see "Cash Used in Investing Activities and Net Capital Expenditures") accompanied with G&A
expenses. Debentures issued by Entropy are funded by investors that have provided Entropy access to an aggregate
of up to $500 million in committed capital, of which $250.3 million has been drawn as at December 31, 2025. Entropy
funds its capital projects by issuing unsecured debentures that are non-recourse to Advantage, which does not
provide any financing to Entropy for capital projects. Additionally, Entropy has access to a maximum of $10 million
of non-convertible unsecured debentures to fund certain other non-project expenditures, of which $4.1 million has
been drawn.
Advantage Energy Ltd. - 37
Liquidity and Capital Resources (continued)
Advantage monitors its capital structure and makes adjustments according to market conditions in an effort to meet
its objectives given the current outlook of the business and industry in general. The capital structure of the
Corporation is composed of working capital, bank indebtedness, convertible debentures, unsecured debentures
issued by Entropy, and share capital. Advantage may manage its capital structure by issuing new common shares in
the capital of Advantage ("Common Shares"), repurchasing outstanding Common Shares, obtaining additional
financing through bank indebtedness, refinancing current debt, issuing other financial or equity-based instruments,
declaring a dividend, or adjusting capital spending. The capital structure is reviewed by Management and the Board
of Directors on an ongoing basis. Management of the Corporation’s capital structure is facilitated through its
financial and operational forecasting processes. Selected forecast information is frequently provided to the Board
of Directors. This continual financial assessment process further enables the Corporation to mitigate risks. The
Corporation continues to satisfy all liabilities and commitments as they come due.
Bank Indebtedness, Credit Facilities and Working Capital
As at December 31, 2025, Advantage had bank indebtedness outstanding of $413.0 million, a decrease of $57.4
million since December 31, 2024 due to adjusted funds flow in excess of net capital expenditures. Advantage’s Credit
Facility is collateralized by a $2 billion floating charge demand debenture covering all assets of the Corporation and
has no financial covenants (the "Credit Facility"). The borrowing base for the Credit Facility is determined by the
banking syndicate through an evaluation of our reserve estimates based on their independent commodity price
assumptions. Revisions or changes in the reserve estimates and commodity prices can have either a positive or a
negative impact on the borrowing base. On June 12, 2025, the Credit Facility was renewed with no changes to the
borrowing base of $650 million, comprised of a $60 million extendible revolving operating loan facility from one
financial institution and a $590 million extendible revolving loan facility from a syndicate of financial institutions.
The Credit Facility has a term of two years with a maturity date in June 2027 and is subject to an annual review and
extension by the lenders. During the revolving period, a review of the maximum borrowing amount occurs annually
on or before May 31 and semi-annually on or before November 30. During the term, no principal payments are
required until the revolving period matures in June 2027 in the event of a reduction, or the Credit Facility not being
renewed. The Corporation had letters of credit of $8.4 million outstanding at December 31, 2025 (December 31,
2024 - $5.5 million). The Credit Facility does not contain any financial covenants, but the Corporation is subject to
various affirmative and negative covenants under its Credit Facilities. The Corporation was in compliance with all
covenants as at December 31, 2025, and December 31, 2024.
The Corporation had a working capital surplus of $4.5 million as at December 31, 2025, as compared to a working
capital deficit at December 31, 2024 of $3.3 million, largely due to a decrease in trade and other accrued liabilities
due to timing of capital expenditures. Our working capital includes cash and cash equivalents, trade and other
receivables, prepaid expenses and deposits, and trade and other accrued liabilities. Working capital varies primarily
due to the timing of such items, the current level of business activity including our capital expenditure program,
commodity price volatility, and seasonal fluctuations. We do not anticipate any problems in meeting future
obligations as they become due as they can be satisfied with cash provided by operating activities and our available
Credit Facilities.
Advantage Energy Ltd. - 38
Convertible Debentures
The Corporation has $143.8 million principal amount of convertible unsecured subordinated debentures
outstanding (the "Debentures") at a price of $1,000 per debenture as at December 31, 2025. The Debentures will
mature and be repayable on June 30, 2029 and will accrue interest at the rate of 5% per annum payable semi-
annually in arrears on June 30 and December 31 of each year. The fair value of the Debentures at December 31,
2025, was $160.6 million, using quoted market prices on the Toronto Stock Exchange (“TSX”).
At the Debenture holder's option, the Debentures may be convertible into Common Shares at any time prior to the
close of business on the earlier of the business day immediately preceding (i) the maturity date, or (ii) if called for
redemption, the date fixed for redemption by the Corporation, (iii) if called for repurchase in the event of a change
of control, the payment date, at a conversion price of $14.58 per Common Share, subject to adjustment in certain
events. This represents a conversion rate of approximately 68.5871 Common Shares for each $1,000 principal
amount of the Debentures, subject to the operation of certain antidilution provisions. In the event of a change of
control of the Corporation or the redemption of the Debentures by Advantage, subject to certain terms and
conditions, holders of the Debentures will be entitled to convert their Debentures and, subject to certain limitations,
receive, in addition to the number of Common Shares they would otherwise be entitled to receive, an additional
number of Common Shares per $1,000 principal amount of the Debentures.
Unsecured Debentures
The Corporation’s subsidiary Entropy has entered into two investment agreements with investors who provided
capital commitments of $300 million and $200 million, respectively (the "Investment Agreements"). In connection
with the Investment Agreements, Entropy will issue unsecured debentures to fund carbon capture and storage
projects that reach final investment decision as certain predetermined return thresholds are met. Under the terms
of the Investment Agreements, Entropy and the investors have options that provide for the unsecured debentures
to be exchanged for common shares at an exchange price of $10.00 per share and $12.75 per share, respectively,
subject to adjustment in certain circumstances. The investors have the option to exchange the outstanding
unsecured debentures for common shares at any time while Entropy may commence a mandatory exchange of
unsecured debentures for common shares in advance of an Initial Public Offering ("IPO"). The unsecured debentures
have a term of 10 years, if not exchanged for common shares, which are to be repaid at the end of the term in the
amount greater of the principal amount and the investor’s pro rata share of the fair market value of Entropy. Each
unsecured debenture issued by Entropy bears an interest rate of 8% per annum that Entropy can elect to pay in
cash or pay-in-kind, due on a quarterly basis. Any paid-in-kind interest is added to the aggregate principal, subject
to certain limitations. In 2025, Entropy entered into non-convertible unsecured debenture financing arrangements
for aggregate principal availability of up to $10 million to fund certain other non-project expenditures. These non-
convertible unsecured debentures bear interest at 15% per annum and provide for a payment-in-kind feature under
which interest may be capitalized to the principal balance, to a maximum of 30%. The debentures have a term of
five years from the date of issuance and include provisions permitting early repayment. As at December 31, 2025,
Entropy’s unsecured debentures have an outstanding aggregate principal balance of $250.3 million (December 31,
2024 - $101.0 million) and an aggregate balance of non-convertible unsecured debentures of $4.1 million (December
31, 2024 - $0.0 million).
During 2025, Entropy issued unsecured debentures for gross proceeds of $135.0 million (December 31, 2024 -
$55.0 million) and incurred $6.5 million of issuance costs (December 31, 2024 - $3.5 million). Entropy also issued
non-convertible unsecured debentures of $4.0 million and incurred interest of $0.1 million which was paid-in-
kind. Subsequent to year-end, Entropy issued unsecured debentures for gross proceeds of $50.0 million.
For the year ended December 31, 2025, Entropy incurred interest on unsecured debentures of $14.3 million which
was paid-in-kind (December 31, 2024 - $5.2 million).
Advantage Energy Ltd. - 39
Other Liabilities
The Corporation has a take-or-pay volume commitment with a 12.5% working interest partner due to expire in 2035.
The volume commitment agreement is treated as a financing transaction with an effective interest rate of 9.1%. For
the year ended December 31, 2025, the Corporation made cash payments of $13.1 million (December 31, 2024 -
$13.1 million) under the take-or-pay volume commitment agreement.
As at December 31, 2025, the Corporation had a decommissioning liability of $100.5 million (December 31, 2024 –
$126.8 million) for the future abandonment and reclamation of natural gas and liquids properties. The
decommissioning liability has decreased $26.3 million due to an increase in the risk-free rate, change in estimates
and the settlement of liabilities through abandonment and reclamation activities. The decommissioning liability
includes assumptions in respect of actual costs to abandon and reclaim wells and facilities, the time frame in which
such costs will be incurred, annual inflation factors and discount rates. The total estimated undiscounted, uninflated
cash flows required to settle the Corporation’s decommissioning liability was $163.4 million (December 31, 2024 –
$168.7 million), with 54% of these costs to be incurred beyond 2050. Actual spending on decommissioning for the
year ended December 31, 2025, was $5.1 million (year ended December 31, 2024 – $3.1 million).
Non-controlling interest ("NCI")
Advantage owns 92% of the common shares of Entropy and therefore consolidates 100% of Entropy while
recognizing a non-controlling interest in shareholders’ equity that represents the carrying value of the 8% common
shares held by outside interests. Assuming the outstanding unsecured debentures held by third-party investors as
at December 31, 2025, are exchanged for common shares in accordance with the terms of the investment
agreements, Advantage would own approximately 50% of Entropy’s common shares on an as-converted basis (see
"Unsecured Debentures").
If the investors in Entropy were to invest their total $500 million capital commitment for unsecured debentures and
the unsecured debentures were subsequently exchanged for common shares, Advantage would own approximately
35% of the common shares. As Entropy continues to issue unsecured debentures to fund carbon capture and storage
projects, Advantage’s ownership interest on an as-converted basis would decline. When Advantage no longer
controls Entropy, the Corporation would cease consolidating Entropy and would account for its interest in Entropy
under the applicable accounting guidance.
For the year ended December 31, 2025, the net loss and comprehensive loss attributed to non-controlling interest
was $2.1 million (December 31, 2024 - $1.6 million).
Shareholders’ Equity
On May 8, 2025, the TSX approved the Corporation renewing its normal course issuer bid ("NCIB"). The NCIB
commenced on May 14, 2025 and will terminate on May 13, 2026, or such earlier date as Advantage may complete
its purchases under the NCIB. Pursuant to the NCIB, Advantage is authorized to purchase for cancellation, from time
to time, as it considered advisable, up to a maximum of 14,415,014 Common Shares of the Corporation. Purchases
pursuant to the NCIB will be made on the open market through the facilities of the TSX and/or Canadian alternative
trading systems at the prevailing market price at the time of purchase. All Common Shares acquired under the NCIB
will be cancelled. Securityholders may obtain a copy of the Notice of Intention to Make a Normal Course Issuer Bid,
without charge, by contacting Advantage. For the year ended December 31, 2025, the Corporation used a portion
of the proceeds from recent non-core asset dispositions and free cash flow to fund purchasing 0.7 million Common
Shares for cancellation at an average price of $10.16 per Common Share for a total of $6.7 million.
As at December 31, 2025, a total of 2.9 million Performance Share Units were outstanding under the Corporation’s
Restricted and Performance Award Incentive Plan, which represents 1.8% of Advantage’s total outstanding Common
Shares.
As at March 5, 2026, Advantage had 166.9 million Common Shares outstanding.
Advantage Energy Ltd. - 40
Annual Financial Information
The following is a summary of select financial information of the Corporation for the years indicated.
($000, except as otherwise indicated)
Year ended
December 31, 2025
Year ended
December 31, 2024
Year ended
December 31, 2023
Total revenues
685,287
553,073
535,187
Net income attributable to Advantage
shareholders
53,051
21,719
101,597
per share - basic
0.32
0.13
0.61
per share - diluted
0.31
0.13
0.59
Total assets
3,071,015
2,945,958
2,299,028
Total non-current liabilities
999,391
1,061,293
599,932
Quarterly Performance
(1)
Specified financial measure which may not be comparable to similar specified financial measures used by other entities. Please see
"Specified Financial Measures".
(2)
Based on basic and diluted weighted average shares outstanding, as applicable.
(3)
Based on adjusted diluted weighted average shares outstanding.
(4)
Net income (loss) and comprehensive income (loss) attributable to Advantage Shareholders.
(5)
Operating highlights are for Advantage’s natural gas and liquids operations.
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
($000, except as otherwise indicated)
Financial Statement Highlights
Natural gas and liquids sales
181,796
130,805
164,593
221,790
163,477
139,840
104,081
135,897
Net income (loss) and comprehensive income (loss)
(4)
9,616
(43)
72,502
(29,024)
17,130
(6,490)
(12,084)
23,163
per basic share
(2)
0.06
-
0.43
(0.17)
0.10
(0.04)
(0.07)
0.14
per diluted share
(2)
0.06
-
0.41
(0.17)
0.10
(0.04)
(0.07)
0.14
Basic weighted average shares (000)
166,941
166,968
167,179
166,821
166,974
166,972
161,362
160,444
Diluted weighted average shares (000)
170,338
166,968
180,785
166,821
169,785
166,972
161,362
164,129
Cash provided by operating activities
74,357
80,100
80,084
122,949
56,350
46,719
47,090
67,374
Cash provided by (used in) financing activities
41,387
(33,040)
42,046
11,670
22,789
(1,097)
447,502
11,883
Cash used in investing activities
(116,477)
(102,338)
(95,230)
(107,919)
(71,202)
(52,765)
(494,331)
(79,427)
Other Financial Highlights
Adjusted funds flow
(1)
96,172
69,178
85,247
118,642
81,389
52,260
42,354
65,393
per basic share
(1)(2)
0.58
0.41
0.51
0.71
0.49
0.31
0.26
0.41
per diluted share
(1)(3)
0.56
0.40
0.50
0.70
0.48
0.31
0.26
0.40
Net capital expenditures
(1)
117,581
120,040
67,288
113,987
99,162
66,727
490,888
80,134
Free cash flow surplus (deficit)
(1)
(15,461)
(25,693)
17,959
655
(29,194)
(14,668)
(3,059)
(14,741)
Bank indebtedness
412,993
411,895
440,957
446,333
470,424
469,551
488,008
238,578
Net debt
(1)
806,688
775,723
717,465
723,247
718,449
693,959
674,665
279,963
Operating Highlights
(5)
Production
Crude oil (bbls/d)
7,372
8,483
7,627
8,487
7,527
8,144
3,033
2,630
Condensate (bbls/d)
938
684
848
1,023
979
1,055
1,200
1,231
NGLs (bbls/d)
3,462
2,972
3,404
3,763
3,379
3,621
2,908
2,591
Total liquids production (bbls/d)
11,772
12,139
11,879
13,273
11,885
12,820
7,141
6,452
Natural gas (mcf/d)
408,307
356,059
397,379
422,998
389,331
369,306
355,563
357,410
Total production (boe/d)
79,823
71,482
78,108
83,773
76,774
74,371
66,401
66,020
Average prices (including realized derivatives)
Natural gas ($/mcf)
3.31
2.37
2.70
3.29
2.46
1.65
1.82
2.86
Liquids ($/bbl)
72.82
78.13
79.96
86.53
87.84
85.05
84.58
80.21
Operating Netback ($/boe)
Natural gas and liquids sales
24.76
19.89
23.16
29.42
23.14
20.44
17.22
22.62
Realized gains on derivatives
2.92
5.19
2.77
0.87
2.91
2.44
1.59
0.70
Processing and other income
0.08
0.14
0.09
0.13
0.11
0.15
0.32
0.30
Net sales of purchased natural gas
-
0.26
-
-
-
-
-
-
Royalty expense
(1.83)
(1.87)
(1.86)
(2.80)
(2.40)
(2.83)
(1.16)
(1.52)
Operating expense
(5.93)
(5.82)
(4.90)
(4.76)
(5.19)
(5.46)
(4.09)
(4.08)
Transportation expense
(4.01)
(4.21)
(4.03)
(4.06)
(3.77)
(3.88)
(3.73)
(4.23)
Operating netback
(1)
15.99
13.58
15.23
18.80
14.80
10.86
10.15
13.79
2025
2024
Advantage Energy Ltd. - 41
Quarterly Performance (continued)
The table above highlights the Corporation’s performance for the fourth quarter of 2025 and for the preceding seven
quarters. In the first and second quarters of 2024, Advantage allowed production to decline slightly while natural
gas and liquids sales and adjusted funds flow decreased with lower natural gas prices from an unseasonably mild
winter, strong natural gas supply and resulting high North American storage levels. The Corporation increased its
sales and adjusted funds flow in the third and fourth quarters of 2024 primarily due to increased production and
cash flow provided from the Acquired Assets, although significantly weak natural gas prices persisted and had an
adverse offsetting impact. The particularly low natural gas pricing environment during the second and third quarters
resulted in the recognition of net losses.
In the first quarter of 2025 the Corporation generated higher natural gas and liquids sales and adjusted funds flow,
primarily due to increased production and higher natural gas prices. Despite the improved operating and financial
results, the Corporation recorded a net loss driven by a significant unrealized loss from changes in the fair value of
outstanding derivative contracts. In the second quarter of 2025, natural gas and liquids sales and adjusted funds
flow declined relative to the first quarter, reflecting lower production and weaker natural gas and liquids benchmark
prices. This trend continued into the third quarter of 2025 where Alberta natural gas prices declined to historic low
levels and the Corporation strategically curtailed dry gas production during days of exceptionally weak gas prices,
contributing to the nominal net loss for the quarter. However, the lower commodity price environment in the
second and third quarters of 2025 contributed to material unrealized gains on outstanding derivative contracts. In
the fourth quarter of 2025, the Corporation improved its natural gas and liquids sales and adjusted funds flow from
a combination of higher production and higher natural gas prices, partially offset by lower liquids prices, contributing
to a return to net income for the quarter. Cash provided by operating activities experienced greater fluctuations
than adjusted funds flow due to changes in non-cash working capital, which primarily resulted from the amount and
timing of trade payable settlements and accounts receivable collections.
Critical Accounting Estimates
The preparation of financial statements in accordance with IFRS Accounting Standards requires Management to
make certain judgments and estimates. Changes in these judgments and estimates could have a material impact on
the Corporation’s financial results and financial condition.
Management relies on the estimate of reserves as prepared by the Corporation’s independent qualified reserves
evaluator. The process of estimating reserves is critical to several accounting estimates. The process of estimating
reserves is complex and requires significant judgments and decisions based on available geological, geophysical,
engineering and economic data. These estimates may change substantially as additional data from ongoing
development and production activities becomes available and as economic conditions impact natural gas and liquids
prices, operating expense, royalty burden changes, and future development costs. Reserve estimates impact net
income and comprehensive income through depreciation, impairment and impairment reversals of natural gas and
liquids properties. After tax discounted cash flows are used to ensure the carrying amount of the Corporation’s
natural gas and liquids properties are recoverable. The discount rate used is subject to judgement and may impact
the carrying value of the Corporation’s property, plant and equipment. The reserve estimates are also used to assess
the borrowing base for the Credit Facilities. Revision or changes in the reserve estimates can have either a positive
or a negative impact on asset values, net income, comprehensive income and the borrowing base of the
Corporation.
The Corporation’s assets are required to be aggregated into cash generating units ("CGUs") for the purpose of
calculating impairment based on their ability to generate largely independent cash inflows. Factors considered in
the classification include the integration between assets, shared infrastructures, the existence of common sales
points, geography, geologic structure, and the manner in which Management monitors and makes decisions about
its
Advantage Energy Ltd. - 42
Critical Accounting Estimates (continued)
operations. The classification of assets and allocation of corporate assets into CGUs requires significant judgment
and may impact the carrying value of the Corporation’s assets in future periods.
Management’s process of determining the provision for deferred income taxes and the provision for
decommissioning liability costs and related accretion expense are based on estimates. Estimates used in the
determination of deferred income taxes provisions are significant and can include expected future tax rates,
expectations regarding the realization or settlement of the carrying amount of assets and liabilities and other
relevant assumptions. Estimates used in the determination of decommissioning liability cost provisions and
accretion expense are significant and can include proved and probable reserves, future production rates, future
commodity prices, future costs, future interest rates and other relevant assumptions. Revisions or changes in any
of these estimates can have either a positive or a negative impact on asset and liability values, net income and
comprehensive income.
In accordance with IFRS, derivative assets and liabilities are recorded at their fair values at the reporting date, with
gains and losses recognized directly into comprehensive income. The fair value of derivatives outstanding is an
estimate based on pricing models, estimates, assumptions and market data available at that time. As such, the
recognized amounts are non-cash items and the actual gains or losses realized on eventual cash settlement can vary
materially due to subsequent fluctuations in commodity prices as compared to the valuation assumptions. For
embedded derivatives, Management assesses and determines the definition of the host contract and the separate
embedded derivative. The judgements made in determining the host contract can influence the fair value of the
embedded derivative. Determining the fair value of the embedded derivatives requires judgments related to the
choice of a pricing model, estimates of volatility, and market data available at that time. Any changes in the
estimates or inputs utilized to determine fair value could result in a significant impact on the Corporation’s future
operating results.
In determining the fair value of Entropy’s unsecured debentures, judgments are required related to the choice of a
pricing model, the estimation of share price, share price volatility, timing and probability of an IPO, credit spread,
interest rates, and the expected term of the underlying instruments. Any changes in the estimates or inputs utilized
to determine fair value could result in a significant impact on the Corporation’s future operating results.
Changes in Accounting Policies
The Corporation has adopted the following accounting policies during the year ended December 31, 2025.
Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures
On May 30, 2024, the IASB issued targeted amendments to IFRS 9, “Financial Instruments”, and IFRS 7, “Financial
Instruments: Disclosures”. The amendments include new requirements not only for financial institutions but also
for corporate entities which include clarifying the date of recognition and derecognition of some financial assets
and liabilities, with a new exception for some financial liabilities settled through an electronic cash transfer
system. These new requirements will apply at January 1, 2026, with early application permitted. The Corporation
has early adopted the amendments of IFRS 9 and IFRS 7 on the Consolidated Financial Statements at December
31, 2025, with no material impact.
Accounting Pronouncements not yet Adopted
A description of additional accounting standards and interpretations that will be adopted in future periods can
be found in the notes to the Consolidated Financial Statements for the year ended December 31, 2025.
Advantage Energy Ltd. - 43
Environmental Reporting
Environmental regulations impacting climate-related matters continue to evolve and may have additional disclosure
requirements in the future. The International Sustainability Standards Board published the new IFRS sustainability
disclosure standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and
IFRS S2 Climate-related Disclosures, with the aim to develop an environment sustainability disclosure framework
that is accepted globally. In December 2024, the Canadian Sustainability Standards Board (CSSB) published Canadian
versions of the international standards (CSDS 1 and CSDS 2) and the Canadian Securities Administrators (CSA)
previously announced that it intended to take the finalized CSSB standards into account and develop new Canadian
climate-related disclosure requirements that would be mandatory for subject Canadian issuers. On April 23, 2025,
the CSA issued a news release advising that it has paused the work it had previously undertaken to develop new
climate and diversity-related disclosure requirements for Canadian issuers.
If the Corporation is unable to meet future sustainability reporting requirements of regulators or current and future
expectations of stakeholders, its business and ability to attract and retain skilled employees, obtain regulatory
permits, licenses, registrations, approvals and authorizations from various government authorities, and raise capital
may be adversely affected. The cost to comply with these standards, and others that may be developed or evolved
over time, has not yet been quantified.
Evaluation of Disclosure Controls and Procedures
Advantage’s Chief Executive Officer and Chief Financial Officer have designed disclosure controls and procedures
("DC&P"), or caused it to be designed under their supervision, to provide reasonable assurance that material
information relating to the Corporation is made known to them by others, particularly during the period in which
the annual filings are being prepared, and information required to be disclosed by the Corporation in its annual
filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed,
summarized and reported within the time periods specified in securities legislation.
Management of Advantage, including our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Corporation’s DC&P as at December 31, 2025. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that the DC&P are effective as of the end of the year, in all
material respects.
Advantage Energy Ltd. - 44
Evaluation of Internal Controls over Financial Reporting
Advantage’s Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining
internal control over financial reporting ("ICFR"). They have designed ICFR, or caused it to be designed under their
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with IFRS. The control framework Advantage’s officers
used to design the Corporation’s ICFR is the Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations.
Management of Advantage, including our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Corporation’s ICFR as at December 31, 2025. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that the ICFR are effective as of the end of the year, in all material
respects.
Advantage’s Chief Executive Officer and Chief Financial Officer are required to disclose any change in the ICFR that
occurred during our most recent interim period that has materially affected, or is reasonably likely to materially
affect, the Corporation’s ICFR. No material changes in the ICFR were identified during either the quarter or year
ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our ICFR.
It should be noted that while the Chief Executive Officer and Chief Financial Officer believe that the Corporation’s
design of DC&P and ICFR provide a reasonable level of assurance that they are effective, they do not expect that the
control system will prevent all errors and fraud. A control system, no matter how well conceived or operated, does
not provide absolute, but rather is designed to provide reasonable assurance that the objective of the control system
is met. The Corporation’s ICFR may not prevent or detect all misstatements because of inherent limitations.
Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions or deterioration in the degree of compliance with the
Corporation’s policies and procedures.
Specified Financial Measures
Throughout this MD&A and in other documents disclosed by the Corporation, Advantage discloses certain measures
to analyze financial performance, financial position, and cash flow. These non-GAAP and other financial measures
do not have any standardized meaning prescribed under IFRS and therefore may not be comparable to similar
measures presented by other entities. The non-GAAP and other financial measures should not be considered to be
more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income and
comprehensive income, cash provided by operating activities, and cash used in investing activities, as indicators of
Advantage’s performance.
Advantage Energy Ltd. - 45
Specified Financial Measures (continued)
Non-GAAP Financial Measures
Adjusted Funds Flow
The Corporation considers adjusted funds flow to be a useful measure of Advantage’s ability to generate cash from
the production of natural gas and liquids, which may be used to settle outstanding debt and obligations, support
future capital expenditures plans, or return capital to shareholders. Changes in non-cash working capital are
excluded from adjusted funds flow as they may vary significantly between periods and are not considered to be
indicative of the Corporation’s operating performance as they are a function of the timeliness of collecting
receivables and paying payables. Expenditures on decommissioning liabilities are excluded from the calculation as
the amount and timing of these expenditures are unrelated to current production and are partially discretionary
due to the nature of our low liability. A reconciliation of the most directly comparable financial measure has been
provided below:
Three months ended December 31
2025
2024
($000)
Advantage
Entropy
Total
Advantage
Entropy
Total
Cash provided by (used in) operating activities
73,194
1,163
74,357
62,487
(6,137)
56,350
Expenditures on decommissioning liability
941
-
941
2,071
-
2,071
Changes in non-cash working capital
25,008
(4,134)
20,874
19,751
3,217
22,968
Adjusted funds flow
99,143
(2,971)
96,172
84,309
(2,920)
81,389
Year ended December 31
2025
2024
($000)
Advantage
Entropy
Total
Advantage
Entropy
Total
Cash provided by (used in) operating activities
362,487
(4,997)
357,490
228,965
(11,432)
217,533
Expenditures on decommissioning liability
5,052
-
5,052
3,059
-
3,059
Changes in non-cash working capital
14,043
(7,346)
6,697
18,007
2,797
20,804
Adjusted funds flow
381,582
(12,343)
369,239
250,031
(8,635)
241,396
Net Capital Expenditures
Net capital expenditures include total capital expenditures related to property, plant and equipment, exploration
and evaluation assets and intangible assets. Management considers this measure reflective of actual capital activity
for the period as it excludes changes in working capital related to other periods and excludes cash receipts on
government grants. A reconciliation of the most directly comparable financial measure has been provided below:
Three months ended December 31
2025
2024
($000)
Advantage
Entropy
Total
Advantage
Entropy
Total
Cash used in investing activities
75,779
40,698
116,477
60,083
11,119
71,202
Changes in non-cash working capital
(2,686)
3,790
1,104
24,204
3,756
27,960
Net capital expenditures
73,093
44,488
117,581
84,287
14,875
99,162
Year ended December 31
2025
2024
($000)
Advantage
Entropy
Total
Advantage
Entropy
Total
Cash used in investing activities
296,653
125,311
421,964
667,101
30,624
697,725
Changes in non-cash working capital
(8,955)
5,887
(3,068)
33,496
5,690
39,186
Net capital expenditures
287,698
131,198
418,896
700,597
36,314
736,911
Advantage Energy Ltd. - 46
Specified Financial Measures (continued)
Non-GAAP Financial Measures (continued)
Free Cash Flow
The Corporation computes free cash flow as adjusted funds flow less net capital expenditures excluding the impact
of asset acquisitions and dispositions. The Corporation uses free cash flow as an indicator of the efficiency and
liquidity of the Corporation’s business by measuring its cash available after net capital expenditures, excluding
acquisitions and dispositions, to settle outstanding debt and obligations and potentially return capital to
shareholders by paying dividends or buying back Common Shares. The Corporation excludes the impact of
acquisitions and dispositions as they are not representative of the free cash flow generated and used in the
Corporation’s natural gas and liquids and carbon capture operations. A reconciliation of the most directly
comparable financial measure has been provided below:
Three months ended December 31
2025
2024
($000)
Advantage
Entropy
Total
Advantage
Entropy
Total
Cash provided by (used in) operating activities
73,194
1,163
74,357
62,487
(6,137)
56,350
Cash used in investing activities
(75,779)
(40,698)
(116,477)
(60,083)
(11,119)
(71,202)
Changes in non-cash working capital
27,694
(7,924)
19,770
(4,453)
(539)
(4,992)
Expenditures on decommissioning liability
941
-
941
2,071
-
2,071
Acquisitions
1,300
4,648
5,948
-
-
-
Dispositions
-
-
-
(11,421)
-
(11,421)
Free cash flow - surplus (deficit)
27,350
(42,811)
(15,461)
(11,399)
(17,795)
(29,194)
Year ended December 31
2025
2024
($000)
Advantage
Entropy
Total
Advantage
Entropy
Total
Cash provided by (used in) operating activities
362,487
(4,997)
357,490
228,965
(11,432)
217,533
Cash used in investing activities
(296,653)
(125,311)
(421,964)
(667,101)
(30,624)
(697,725)
Changes in non-cash working capital
22,998
(13,233)
9,765
(15,489)
(2,893)
(18,382)
Expenditures on decommissioning liability
5,052
-
5,052
3,059
-
3,059
Acquisitions
1,300
29,817
31,117
445,274
-
445,274
Dispositions
(4,000)
-
(4,000)
(11,421)
-
(11,421)
Free cash flow - surplus (deficit)
91,184
(113,724)
(22,540)
(16,713)
(44,949)
(61,662)
Advantage Energy Ltd. - 47
Specified Financial Measures (continued)
Operating Income
Operating income for Advantage’s natural gas and liquids operations is comprised of natural gas and liquids sales,
realized gains on derivatives, processing and other income, net sales of purchased natural gas, net of expenses from
field operations including royalty expense, operating expense and transportation expense. Operating income
provides Management and users with a measure to compare the profitability of Advantage’s field operations across
companies, development areas and specific wells. The composition of operating income is as follows:
Three months ended
December 31
Year ended
December 31
($000)
2025
2024
2025
2024
Natural gas and liquids sales
181,796
163,477
698,984
543,295
Realized gains on derivatives
21,431
20,580
81,797
51,127
Processing and other income
599
746
3,114
5,557
Net sales of purchased natural gas
-
-
1,677
-
Royalty expense
(13,461)
(16,983)
(60,105)
(52,471)
Operating expense
(43,544)
(36,677)
(152,466)
(123,226)
Transportation expense
(29,459)
(26,632)
(116,387)
(101,139)
Operating income
117,362
104,511
456,614
323,143
Non-GAAP Ratios
Adjusted Funds Flow per Basic Share & Adjusted Funds Flow per Diluted Share
Adjusted funds flow per share is calculated by dividing adjusted funds flow, by segment, by the basic weighted
average shares outstanding and the adjusted diluted weighted average shares outstanding. The Corporation
adjusted diluted weighted average shares to be calculated based on adjusted funds flow and to include only dilutive
instruments that Management considers likely to be dilutive as at the balance sheet date, based on the current
economic situation. Performance Share Units are included in adjusted diluted shares as they are expected to be
settled in Common Shares. Convertible debentures are excluded until such time that the share price of the
Corporation is greater than the conversion price as it avoids overstating dilution in periods where instruments are
out-of-the-money and not economically viable to convert. Management believes that adjusted funds flow per share
and per diluted share provides investors an indicator of funds generated from the business that could be allocated
to each shareholder’s equity position.
Advantage Energy Ltd. - 48
Specified Financial Measures (continued)
Non-GAAP Ratios (continued)
Adjusted Funds Flow per Basic Share & Adjusted Funds Flow per Diluted Share (continued)
Effective June 30, 2025, the Corporation revised its methodology for calculating adjusted funds flow per diluted
share to use adjusted diluted weighted average shares outstanding, to include only instruments likely to be
economically dilutive, as Management believes this approach provides a more accurate measure of adjusted funds
flow per diluted share by better reflecting the economic reality of our capital structure. Comparative figures have
been restated accordingly.
Three months ended
December 31
Year ended
December 31
($000, except as otherwise indicated)
2025
2024
2025
2024
Weighted average shares outstanding (000)
166,941
166,974
166,978
163,955
Diluted weighted average shares outstanding (000)
170,338
169,785
170,180
166,821
Common shares impact - Convertible debentures (000)
-
-
-
-
Adjusted diluted weighted average shares outstanding (000)
170,338
169,785
170,180
166,821
Advantage adjusted funds flow
99,143
84,309
381,582
250,031
Entropy adjusted funds flow
(2,971)
(2,920)
(12,343)
(8,635)
Advantage
Adjusted funds flow per basic share ($/share)
0.59
0.51
2.29
1.53
Adjusted funds flow per diluted share ($/share)
0.57
0.50
2.24
1.50
Entropy
Adjusted funds flow per basic share ($/share)
(0.01)
(0.02)
(0.07)
(0.05)
Adjusted funds flow per diluted share ($/share)
(0.01)
(0.02)
(0.07)
(0.05)
Adjusted Funds Flow per BOE
Adjusted funds flow per boe is derived by dividing adjusted funds flow attributable to Advantage by the total
production in boe for the reporting period. Adjusted funds flow per boe is a useful ratio that allows users to compare
the Corporation’s adjusted funds flow against other corporations with different rates of production.
Three months ended
December 31
Year ended
December 31
($000, except as otherwise indicated)
2025
2024
2025
2024
Advantage adjusted funds flow
99,143
84,309
381,582
250,031
Total production (boe/d)
79,823
76,774
78,267
70,918
Days in period
92
92
365
366
Total production (boe)
7,343,716
7,063,208
28,567,455
25,955,988
Adjusted funds flow per BOE ($/boe)
13.50
11.94
13.36
9.63
Advantage Energy Ltd. - 49
Specified Financial Measures (continued)
Non-GAAP Ratios (continued)
Operating Netback
Operating netback is derived by dividing operating income by the total production in boe for the reporting period.
Operating netback provides Management and users with a measure to compare the profitability of field operations
across companies, development areas and specific wells against other corporations with different rates of
production.
Three months ended
December 31
Year ended
December 31
($000, except as otherwise indicated)
2025
2024
2025
2024
Operating income
117,362
104,511
456,614
323,143
Total production (boe/d)
79,823
76,774
78,267
70,918
Days in period
92
92
365
366
Total production (boe)
7,343,716
7,063,208
28,567,455
25,955,988
Operating netback ($/boe)
15.99
14.80
15.99
12.44
Debt to Adjusted Funds Flow Ratio
Debt to adjusted funds flow ratio is a coverage ratio that provides Management and users the ability to determine
how long it would take the Corporation to repay its bank indebtedness, including working capital, and its outstanding
Convertible Debentures if Advantage devoted all its adjusted funds flow to debt repayment. Debt to adjusted funds
flow is calculated by taking the total of bank indebtedness, working capital, and Convertible Debentures, and
dividing it by adjusted fund flow (for the trailing four quarters) that can be used to satisfy such borrowings. The
Unsecured Debentures, and adjusted funds flow attributed to Entropy are excluded from the calculation as they are
a liability of Entropy and are non-recourse to Advantage.
($000, except as otherwise indicated)
December 31
2025
December 31
2024
Bank indebtedness
412,993
470,424
Convertible debentures
143,750
143,750
Working capital (surplus) deficit
(7,651)
11,377
Debt
549,092
625,551
Adjusted funds flow (prior four quarters)
381,584
250,031
Debt to adjusted funds flow
1.4
2.5
Advantage Energy Ltd. - 50
Specified Financial Measures (continued)
Capital Management Measures
Working capital
Working capital is a capital management financial measure that provides Management and users with a measure of
the Corporation’s short-term operating liquidity. By excluding short-term derivatives and the current portion of
provisions and other liabilities, Management and users can determine if the Corporation’s operations are sufficient
to cover the short-term operating requirements. Working capital is not a standardized measure and therefore may
not be comparable with the calculation of similar measures by other entities.
A summary of working capital as at December 31, 2025 and December 31, 2024 is as follows:
December 31
2025
December 31
2024
Cash and cash equivalents
17,735
20,146
Trade and other receivables
84,973
83,188
Prepaid expenses and deposits
11,016
10,000
Trade and other accrued liabilities
(109,248)
(116,609)
Working capital surplus (deficit)
4,476
(3,275)
Net Debt
Net debt is a capital management financial measure that provides Management and users with a measure to assess
the Corporation’s liquidity. Net debt is not a standardized measure and therefore may not be comparable with the
calculation of similar measures by other entities.
A summary of the reconciliation of net debt as at December 31, 2025 and December 31, 2024 is as follows:
December 31
2025
December 31
2024
Bank indebtedness
412,993
470,424
Convertible debentures
143,750
143,750
Working capital (surplus) deficit
(7,651)
11,377
Net debt attributable to Advantage
549,092
625,551
Unsecured debentures
254,421
101,000
Working capital (surplus) deficit
3,175
(8,102)
Net debt attributable to Entropy
257,596
92,898
Net debt
806,688
718,449
Advantage Energy Ltd. - 51
Specified Financial Measures (continued)
Supplementary Financial Measures
Average Realized Prices
The Corporation discloses multiple average realized prices within the MD&A (see "Commodity Prices and
Marketing"). The determination of these prices are as follows:
"Condensate" is comprised of condensate sales, as determined in accordance with IFRS, divided by the Corporation’s
condensate production.
"Crude Oil" is comprised of crude oil sales, as determined in accordance with IFRS, divided by the Corporation’s
crude oil production.
"Natural gas excluding derivatives" is comprised of natural gas sales, as determined in accordance with IFRS, divided
by the Corporation’s natural gas production.
"Natural gas including derivatives" is comprised of natural gas sales, including realized gains (losses) on natural gas
derivatives, as determined in accordance with IFRS, divided by the Corporation’s natural gas production.
"NGLs" is comprised of NGLs sales, as determined in accordance with IFRS, divided by the Corporation’s NGLs
production.
"Total liquids excluding derivatives" is comprised of crude oil, condensate and NGLs sales, as determined in
accordance with IFRS, divided by the Corporation’s crude oil, condensate and NGLs production.
"Total liquids including derivatives" is comprised of crude oil, condensate and NGLs sales, including realized gains
(losses) on crude oil derivatives, as determined in accordance with IFRS, divided by the Corporation’s crude oil,
condensate and NGLs production.
Dollars per BOE figures
Throughout the MD&A, the Corporation presents certain financial figures, in accordance with IFRS, stated in dollars
per boe. All dollar per boe figures herein forth only include the results of Advantage’s natural gas and liquids
operations and exclude the results of Entropy. These figures are determined by dividing the applicable financial
figure as prescribed under IFRS by the Corporation’s total production for the respective period. Below is a list of
figures which have been presented in the MD&A in $ per boe:
Depreciation and amortization expense per boe
Finance expense per boe
General and administrative expense per boe
Interest expense per boe
Natural gas and liquids sales per boe
Net sales of purchased natural gas per boe
Operating expense per boe
Realized gains on derivatives per boe
Royalty expense per boe
Processing and other income per boe
Share-based compensation expense per boe
Transportation expense per boe
Advantage Energy Ltd. - 52
Conversion Ratio
The term "boe" or barrels of oil equivalent and "Mcfe" or thousand cubic feet equivalent may be misleading,
particularly if used in isolation. A boe or Mcfe conversion ratio of six thousand cubic feet of natural gas equivalent
to one barrel of oil (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and
crude oil based on the current prices of natural gas and crude oil is significantly different from the energy
equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Abbreviations
Terms and abbreviations that are used in this MD&A that are not otherwise defined herein are provided below:
bbl(s)
- barrel(s)
bbls/d
- barrels per day
boe
- barrels of oil equivalent (6 Mcf = 1 bbl)
boe/d
- barrels of oil equivalent per day
GJ
- gigajoules
Mcf
- thousand cubic feet
Mcf/d
- thousand cubic feet per day
Mcfe
- thousand cubic feet equivalent (1 bbl = 6 Mcf)
Mcfe/d
- thousand cubic feet equivalent per day
MMbtu
- million British thermal units
MMbtu/d
- million British thermal units per day
MMcf
- million cubic feet
MMcf/d
- million cubic feet per day
Crude oil
- Light Crude Oil and Medium Crude Oil as defined in National Instrument 51-101
"NGLs" & "condensate"
- Natural Gas Liquids as defined in National Instrument 51-101
Natural gas
- "Conventional Natural Gas" and "Shale Gas" as defined in National Instrument 51-101
Liquids
- Total of crude oil, condensate and NGLs
AECO
- a notional market point on TransCanada Pipeline Limited’s NGTL system where
the purchase and sale of natural gas is transacted
MSW
- price for mixed sweet crude oil at Edmonton, Alberta
NGTL
- NOVA Gas Transmission Ltd.
WTI
- West Texas Intermediate, price paid in U.S. dollars at Cushing, Oklahoma, for
crude oil of standard grade
CCS
- Carbon Capture and Storage
CCUS
- Carbon Capture Utilization and Storage
IP30
- average initial peak production rate over 30 consecutive days after a well is brought
on production
IP90
- average initial peak production rate over 90 consecutive days after a well is brought
on production
nm
- not meaningful information
Advantage Energy Ltd. - 53
Forward-Looking Information and Other Advisories
This MD&A contains certain forward-looking statements and forward-looking information (collectively, "forward-
looking statements"), which are based on our current internal expectations, estimates, projections, assumptions
and beliefs. These forward-looking statements relate to future events or our future performance. All statements
other than statements of historical fact may be forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect",
"may", "will", "project", "predict", "potential", "target", "intend", "could", "might", "should", "believe", "would" and
similar or related expressions. These statements are not guarantees of future performance.
In particular, forward-looking statements in this MD&A include, but are not limited to, statements about our
strategy, plans, objectives, priorities and focus and the benefits to be derived therefrom; Advantage's 2026 capital
program, and our focus on growing adjusted funds flow per share via high rate-of-return development drilling;
anticipated production growth; anticipated timing of the commissioning of our Progress Gas Plant and the
turnround at our Glacier Gas Plant and the anticipated benefits thereof; that as we approach our net debt target,
debt reduction will remain a priority, while share repurchases are expected to be layered in opportunistically;
Advantage's anticipated 2026 average production; the Corporation's 2026 guidance set forth under the heading
"2026 Guidance", including Advantage's anticipated annual royalty rates, operating expense per boe, transportation
expense per boe, G&A expense per boe and finance expense per boe in 2026; the Corporation's forecasted 2026
natural gas market exposure including the anticipated effective production rate; anticipated market dynamics
including softening demand in key regions, evolving trade policies and tariffs, and shifting seasonal consumption
patterns; that Advantage continues to pursue opportunities to diversify sales beyond Alberta markets to reduce
exposure to local commodity pricing and enhance operating netbacks, and that such pursuit may impact
Advantage's transportation expense; the terms of the Corporation's derivative contracts, including their purposes,
the timing of settlement of such contracts and the anticipated benefits to be derived therefrom; that our Charlie
Lake drilling program continues to outperform our acquisition type curve; that we have access to sufficient
processing capacity to ensure the efficient development of our Charlie Lake properties; the focus of our drill program
at Glacier; anticipated benefits of Advantage's completion of a new water disposal well at Glacier, including its ability
to help maintain our low-cost structure; anticipated synergies and growth from completion and commissioning of
the Progress facility, and that the Progress Gas Plant will provide incremental processing capacity for our next phase
of low-cost production growth at Glacier; that Advantage remains committed to its strategy of debt reduction and
continues to make meaningful progress; Advantage's disciplined financial strategy, supported by strong free cash
flow generation and selective non-core asset dispositions; the Corporation's future commitments and contractual
obligations and the anticipated payments in connection therewith and timing thereof; that Advantage monitors its
capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the
current outlook of the business and the industry in general; the Corporation's continual financial assessment process
and the anticipated benefits in connection therewith; the Corporation's ability to satisfy all liabilities and
commitments and meet future obligations as they become due and the means for satisfying such future obligations;
the Corporation's strategy for managing its capital structure; the terms of the Corporation's Credit Facility, including
the timing of the next review of the Credit Facility and the Corporation's expectations regarding the extension of
the Credit Facility at each annual review; the terms of the Debentures; the terms of Entropy's unsecured debentures;
the anticipated undiscounted, uninflated cash flows required to settle the Corporation's decommissioning liability
and the anticipated timing that such costs will be incurred; the statements under "critical accounting estimates" in
this MD&A; and other matters.
These forward-looking statements involve substantial known and unknown risks and uncertainties, many of which
are beyond our control, including, but not limited to, risks related to changes in general economic conditions
(including as a result of demand and supply effects resulting from the actions of OPEC and non-OPEC countries)
which will, among other things, impact demand for and market prices of the Corporation’s products, market and
business
Advantage Energy Ltd. - 54
Forward-Looking Information and Other Advisories (continued)
conditions; continued volatility in market prices for oil and natural gas; the risk that (i) the tariffs that are currently
in effect on goods exported from or imported into Canada continue in effect for an extended period of time, the
tariffs that have been threatened are implemented, that tariffs that are currently suspended are reactivated, the
rate or scope of tariffs are increased, or new tariffs are imposed, including on oil and natural gas, (ii) the U.S. and/or
Canada imposes any other form of tax, restriction or prohibition on the import or export of products from one
country to the other, including on oil and natural gas, and (iii) the tariffs imposed or threatened to be imposed by
the U.S. on other countries and retaliatory tariffs imposed or threatened to be imposed by other countries on the
U.S., will trigger a broader global trade war which could have a material adverse effect on the Canadian, U.S. and
global economies, and by extension the Canadian oil and natural gas industry and the Corporation, including by
decreasing demand for (and the price of) oil and natural gas, disrupting supply chains, increasing costs, causing
volatility in global financial markets, and limiting access to financing; the impact of significant declines in market
prices for oil and natural gas; stock market volatility; changes to legislation and regulations and how they are
interpreted and enforced; our ability to comply with current and future environmental or other laws; actions by
governmental or regulatory authorities including increasing taxes, regulatory approvals, changes in investment or
other regulations; interest rates fluctuation; inflation rate fluctuation; changes in tax laws, royalty regimes and
incentive programs relating to the oil and gas industry; the risk that Advantage may not achieve its strategy of debt
reduction or that Advantage will not be able to realize strong free cash flow generation or non-core asset
dispositions; the effect of acquisitions; our success at acquisition, exploitation and development of reserves;
unexpected drilling results; the risk that the Corporation may not be able to continue to realize anticipated cost
improvements from acquisition synergies and exceptional operational performance; failure to achieve production
targets on timelines anticipated or at all; changes in commodity prices, currency exchange rates, capital
expenditures, reserves or reserves estimates and debt service requirements; the risk that Advantage may be
negatively impacted by industry consolidation; the risk that wars and other armed conflicts adversely affect world
economies and the demand for oil and natural gas, including the ongoing war between Russian and Ukraine and/or
hostilities in the Middle East and Venezuela; the occurrence of unexpected events involved in the exploration for,
and the operation and development of, oil and gas properties; hazards such as fire, explosion, blowouts, cratering,
and spills, each of which could result in substantial damage to wells, production facilities, other property and the
environment or in personal injury; changes or fluctuations in production levels; individual well productivity; delays
in anticipated timing of drilling and completion of wells; lack of available capacity on pipelines; delays in timing of
facility installation; performance or achievement could differ materially from those expressed in, or implied by, the
forward-looking information; the failure to extend the Credit Facility at each annual review; competition from other
producers; the lack of availability of qualified personnel or management; ability to access sufficient capital from
internal and external sources; credit risk; the risk that Advantage's average production in 2026 may be less than
anticipated; the risk that Advantage does not achieve its anticipated guidance for 2026 as set forth in this MD&A
under the heading "2026 Guidance"; the risk that the Corporation may not be properly diversified to multiple
markets; the risk that Advantage may not have access to sufficient processing capacity to ensure the efficient
development of our Charlie Lake properties; the risk that the Corporation may not satisfy all of its liabilities and
commitments and meet future obligations as they become due; the risk that the undiscounted, uninflated cash
flows required to settle the Corporation's decommissioning liability may be greater than expected; the risk that
Advantage's annual royalty rates in 2026 may be greater than anticipated; the risk that Advantage's operating
expense per boe and transportation expense per boe in 2026 may be greater than anticipated; the risk that
additional natural gas processing will not occur in the second half of 2026 as anticipated; the risk that as Advantage
approaches its net debt target, it will not prioritize debt reduction or layer in share repurchases opportunistically;
the risk that the Corporation's water disposal well completed at Glacier may not lead to the benefits anticipated;
the risk that the Progress gas plant will not be completed and commissioned when anticipated or result in the
anticipated benefits thereof; and the risks and uncertainties described in the Corporation’s Annual Information Form
which is available at
Advantage Energy Ltd. - 55
Forward-Looking Information and Other Advisories (continued)
www.sedarplus.ca and www.advantageog.com. Readers are also referred to risk factors described in other
documents Advantage files with Canadian securities authorities.
With respect to forward-looking statements contained in this MD&A, in addition to other assumptions identified
herein, Advantage has made assumptions regarding, but not limited to: current and future prices of oil and natural
gas; the duration and impact of tariffs that are currently in effect on goods exported from or imported into Canada,
and that other than the tariffs that are currently in effect, neither the U.S. nor Canada (i) increases the rate or scope
of such tariffs, reenacts tariffs that are currently suspended, or imposes new tariffs, on the import of goods from
one country to the other, including on oil and natural gas, and/or (ii) imposes any other form of tax, restriction or
prohibition on the import or export of products from one country to the other, including on oil and natural gas; that
the current commodity price and foreign exchange environment will continue or improve; conditions in general
economic and financial markets; effects of regulation by governmental agencies; receipt of required stakeholder
and regulatory approvals; royalty regimes; future exchange rates; royalty rates; future operating costs; availability
of skilled labour; availability of drilling and related equipment; timing and amount of capital expenditures; the ability
to efficiently integrate assets acquired through acquisitions; the impact of increasing competition; the price of crude
oil and natural gas; that the Corporation will have sufficient cash flow, debt or equity sources or other financial
resources required to fund its capital and operating expenditures and requirements as needed; that the
Corporation’s conduct and results of operations will be consistent with its expectations; that the Corporation will
have the ability to develop the Corporation’s crude oil and natural gas properties in the manner currently
contemplated; availability of pipeline capacity; that current or, where applicable, proposed assumed industry
conditions, laws and regulations will continue in effect or as anticipated as described herein; that the Corporation's
cash provided by operating activities and available Credit Facilities will be able to satisfy all of the Corporation's
liabilities, commitments and future obligations as they become due; and that the estimates of the Corporation’s
production, reserves and resources volumes and the assumptions related thereto (including commodity prices and
development costs) are accurate in all material respects.
Management has included the above summary of assumptions and risks related to forward-looking information
provided in this MD&A in order to provide shareholders with a more complete perspective on Advantage's future
operations and such information may not be appropriate for other purposes. Advantage’s actual results,
performance or achievement could differ materially from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what benefits that Advantage will derive there from.
Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are
made as of the date of this MD&A and Advantage disclaims any intent or obligation to update publicly any forward-
looking statements, whether as a result of new information, future events or results or otherwise, other than as
required by applicable securities laws.
The future acquisition by the Corporation of Common Shares pursuant to a share buyback program, including its
NCIB and future NCIBs, if any, and the level thereof is uncertain. Any decision to implement a share buyback
program, including the Corporation's NCIB and to acquire Common Shares of the Corporation pursuant to the NCIB
will be subject to the discretion of the board of directors of the Corporation and may depend on a variety of factors,
including, without limitation, the Corporation's business performance, financial condition, financial requirements,
growth plans, expected capital requirements and other conditions existing at such future time including, without
limitation, contractual restrictions and satisfaction of the solvency tests imposed on the Corporation under
applicable corporate law. There can be no assurance of the number of Common Shares of the Corporation that the
Corporation will acquire pursuant to a share buyback program, including its NCIB or future NCIBs, if any, in the
future.
Advantage Energy Ltd. - 56
Forward-Looking Information and Other Advisories (continued)
This MD&A contains information that may be considered a financial outlook under applicable securities laws about
the Corporation's potential financial position, including, but not limited to: the terms of the Corporation's derivative
contracts; Advantage's anticipated annual royalty rates, operating expense per boe and transportation expense per
boe in 2026; the Corporation's future commitments and contractual obligations; and the anticipated undiscounted,
uninflated cash flows required to settle the Corporation's decommissioning liability, all of which are subject to
numerous assumptions, risk factors, limitations and qualifications, including those set forth in the above paragraphs.
The actual results of operations of the Corporation and the resulting financial results will vary from the amounts set
forth in this MD&A and such variations may be material. This information has been provided for illustration only
and with respect to future periods are based on budgets and forecasts that are speculative and are subject to a
variety of contingencies and may not be appropriate for other purposes. Accordingly, these estimates are not to be
relied upon as indicative of future results. Except as required by applicable securities laws, the Corporation
undertakes no obligation to update such financial outlook. The financial outlook contained in this MD&A was made
as of the date of this MD&A and was provided for the purpose of providing further information about the
Corporation's potential future business operations. Readers are cautioned that the financial outlook contained in
this MD&A is not conclusive and is subject to change.
This MD&A contains metrics commonly used in the oil and natural gas industry which have been prepared by
management such as “operating netback”. These terms do not have standard meaning and may not be comparable
to similar measures presented by other companies and, therefore, should not be used to make such comparisons.
Management uses these oil and natural gas metrics for its own performance measurements, and to provide
shareholders with measures to compare Advantage’s operations overtime. Readers are cautioned that the
information provided by these metrics, or that can be derived from metrics presented in the MD&A, should not be
relied upon for investment or other purposes. Refer above to “Specified Financial Measures” section of this MD&A
for additional disclosure on “operating netback”.
References in this MD&A to short-term production rates, such as IP30 and IP90, are useful in confirming the
presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence
production and decline thereafter and are not indicative of long-term performance or of ultimate recovery.
Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While
encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production of
Advantage.
Certain information in this MD&A may constitute "analogous information" as defined in National Instrument 51-
101. Such information includes production estimates, well results and other financial and operational information
obtained from publicly disclosed, internal, and other sources of data. This information may include total production
and production-rates from wells drilled by the Company or other industry participants located in geographical
proximity to lands held by the Company. Management believes the information is relevant as it may help to define
the well results, reservoir characteristics and production profile of lands in which Advantage holds an interest and
to compare the results of operations of such industry participants to that of Advantage. Such information is not an
estimate of the production, reserves or resources attributable to lands held or to be held by Advantage and there is
no certainty that the production, reserves or resources data and economic information for the lands held or to be
held by Advantage will be similar to the information presented herein.
Certain market, independent third party, peer and industry data contained in this MD&A is based upon information
from government or other independent industry publications and reports or based on estimates derived from such
publications and reports. Government and industry publications and reports generally indicate that they have
obtained their information from sources believed to be reliable, but Advantage has not conducted its own
independent verification of such information and does not assume any responsibility for the accuracy, completeness
or reliability of such information.
Advantage Energy Ltd. - 57
Forward-Looking Information and Other Advisories (continued)
References to natural gas, crude oil and condensate and NGLs production in the MD&A refer to conventional natural
gas, light crude oil and medium crude oil and natural gas liquids, respectively, product types as defined in National
Instrument 51-101.
Additional Information
Additional information relating to Advantage can be found on SEDAR+ at www.sedarplus.com and the Corporation’s
website at www.advantageog.com. Such other information includes the annual information form, the management
information circular, press releases, material change reports, material contracts and agreements, and other financial
reports. The annual information form will be of particular interest for current and potential shareholders as it
discusses a variety of subject matter including the nature of the business, description of our operations, general and
recent business developments, risk factors, reserves data and other oil and gas information.
March 5, 2026
Advantage Energy Ltd. - 58
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2025 and 2024
PricewaterhouseCoopers LLP
Suncor Energy Centre, 111 5th Avenue South West, Suite 2900
Calgary, Alberta, Canada T2P 5L3
T.: +1 403 509 7500, F.: +1 403 781 1825
Fax to mail: ca_calgary_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Independent auditor’s report
To the Shareholders of Advantage Energy Ltd.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Advantage Energy Ltd. and its subsidiaries (together, the Corporation) as at
December 31, 2025 and 2024, and its financial performance and its cash flows for the years then ended in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board
(IFRS Accounting Standards).
What we have audited
The Corporation’s consolidated financial statements comprise:
•
the consolidated statements of financial position as at December 31, 2025 and 2024;
•
the consolidated statements of comprehensive income for the years then ended;
•
the consolidated statements of changes in shareholders’ equity for the years then ended;
•
the consolidated statements of cash flows for the years then ended; and
•
the notes to the consolidated financial statements, comprising material accounting policy information and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Corporation in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2025. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
The impact of proved and probable reserves on
natural gas and liquids assets within natural gas and
liquids properties
Our approach to addressing the matter included the following
procedures, among others:
Tested how management determined the proved and
probable reserves used to determine the depreciation
expense for certain properties, which included the
following:
–
The work of management’s expert was used in
performing the procedures to evaluate the
reasonableness of the proved and probable
reserves used to determine depreciation expense.
As a basis for using this work, the competence,
capabilities, and objectivity of management’s expert
were evaluated, the work performed was understood
and the appropriateness of the work as audit
evidence was evaluated. The procedures performed
also included evaluation of the methods and
assumptions used by management’s expert, tests of
the data used by management’s expert and an
evaluation of their findings.
Refer to note 3(d) (iii) – Material accounting policies,
note 4(a) – Material accounting judgments, estimates and
assumptions, and note 10 – Natural gas and liquids properties
to the consolidated financial statements.
The Corporation had $2,649 million of net natural gas and
liquids assets within natural gas and liquids properties as at
December 31, 2025. Depreciation expense related to natural
gas and liquids assets was $223 million for the year then
ended. Natural gas and liquids assets are depreciated using
the units-of-production method by reference to the ratio of
production in the period to the related proved and probable
reserves, taking into account estimated future development
costs necessary to bring those reserves into production. The
proved and probable reserves are estimated by the
Corporation’s independent qualified reserve evaluator
(management’s expert).
Key audit matter
How our audit addressed the key audit matter
Key assumptions developed by management used to
determine proved and probable reserves include the estimated
future development costs, expected future rates of production
and future natural gas and liquids prices.
We considered this a key audit matter due to (i) the judgments
by management, including the use of management’s expert,
when estimating the proved and probable reserves and (ii) a
high degree of auditor judgment, subjectivity and effort in
performing procedures relating to the key assumptions used by
management.
–
Evaluated the reasonableness of estimated future
development costs and expected future rates of
production by considering the current and past
performance of the Corporation and whether these
assumptions were consistent with evidence obtained
in other areas of the audit, as applicable.
–
Evaluated the reasonableness of future natural gas
and liquids prices by comparing them to third-party
industry forecasts.
Recalculated the depreciation expense.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard. When we read the information, other than the
consolidated financial statements and our auditor’s report thereon, included in the annual report, if we
conclude that there is a material misstatement therein, we are required to communicate the matter to those
charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate the
Corporation or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Corporation’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Corporation’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Corporation to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
•
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Corporation as a basis for forming an opinion on
the consolidated financial statements. We are responsible for the direction, supervision and review of the
audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Simon Baker.
Chartered Professional Accountants
Calgary, Alberta
March 5, 2026
/s/PricewaterhouseCoopers LLP
Advantage Energy Ltd. - 65
Advantage Energy Ltd.
Consolidated Statements of Financial Position
(Expressed in thousands of Canadian dollars)
Notes
December 31
2025
December 31
2024
ASSETS
Current assets
Cash and cash equivalents
6
17,735
20,146
Trade and other receivables
7
84,973
83,188
Prepaid expenses and deposits
11,016
10,000
Derivative asset
11
34,834
50,358
Total current assets
148,558
163,692
Non-current assets
Derivative asset
11
39,400
78,631
Inventory
8
2,548
3,537
Intangible assets
9
22,776
5,246
Natural gas and liquids properties
10
2,857,733
2,694,852
Total non-current assets
2,922,457
2,782,266
Total assets
3,071,015
2,945,958
LIABILITIES
Current liabilities
Trade and other accrued liabilities
109,248
116,609
Derivative liability
11
402
8,900
Financing liability
14
5,754
5,256
Unsecured debentures
15
255,051
105,026
Provisions and other liabilities
16
12,767
14,724
Total current liabilities
383,222
250,515
Non-current liabilities
Derivative liability
11
1,046
4,624
Bank indebtedness
12
412,993
470,424
Convertible debentures
13
126,583
122,583
Financing liability
14
77,074
82,827
Provisions and other liabilities
16
103,816
127,669
Deferred income tax liability
17
277,879
253,166
Total non-current liabilities
999,391
1,061,293
Total liabilities
1,382,613
1,311,808
SHAREHOLDERS’ EQUITY
Share capital
18
1,987,665
1,989,239
Convertible debentures
13
12,859
12,859
Contributed surplus
199,643
194,819
Deficit
(508,210)
(561,261)
Total shareholders’ equity attributable to Advantage shareholders
1,691,957
1,635,656
Non-controlling interest
19
(3,555)
(1,506)
Total shareholders’ equity
1,688,402
1,634,150
Total liabilities and shareholders’ equity
3,071,015
2,945,958
Commitments and contingencies (note 27)
Subsequent events (note 28)
See accompanying Notes to the Consolidated Financial Statements
On behalf of the Board of Directors of Advantage Energy Ltd.:
Deirdre M. Choate, Director: (signed) "Deirdre M. Choate" Michael Belenkie, Director: (signed) "Michael Belenkie"
Advantage Energy Ltd. - 66
Advantage Energy Ltd.
Consolidated Statements of Comprehensive Income
(Expressed in thousands of Canadian dollars, except per share amounts)
Year ended
December 31
Notes
2025
2024
Revenues
Natural gas and liquids sales
22
698,984
543,295
Sales of purchased natural gas
22
1,121
-
Processing and other income
22
5,834
6,807
Royalty expense
(60,105)
(52,471)
Natural gas and liquids revenue
645,834
497,631
Gains on derivatives
11
39,453
55,442
Total revenues
685,287
553,073
Expenses
Operating expense
154,545
125,747
Transportation expense
116,387
101,139
Natural gas purchases
22
(556)
-
General and administrative expense
23
40,351
33,084
Transaction costs
-
3,276
Share-based compensation expense
20
8,211
3,892
Depreciation and amortization expense
9,10
228,041
199,489
Finance expense - net
24
61,061
52,420
Foreign exchange (gain) loss
588
(439)
Other expenses
8,10
944
1,548
Total expenses
609,572
520,156
Income before taxes and non-controlling interest
75,715
32,917
Income tax expense
17
(24,713)
(12,805)
Net income and comprehensive income before non-controlling interest
51,002
20,112
Net income (loss) and comprehensive income (loss) attributable to:
Advantage shareholders
53,051
21,719
Non-controlling interest
19
(2,049)
(1,607)
51,002
20,112
Net income per share attributable to Advantage shareholders
Basic
21
0.32
0.13
Diluted
21
0.31
0.13
See accompanying Notes to the Consolidated Financial Statements
Advantage Energy Ltd. - 67
Advantage Energy Ltd.
Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in thousands of Canadian dollars)
Share
capital
Convertible
debentures
Contributed
surplus
Deficit
Non-
controlling
interest
Total
shareholders’
equity
Balance, December 31, 2024
1,989,239
12,859
194,819
(561,261)
(1,506)
1,634,150
Net income (loss) and comprehensive income (loss)
-
-
-
53,051
(2,049)
51,002
Share-based compensation (note 20(b))
-
-
9,975
-
-
9,975
Settlement of Performance Share Units (note 18)
6,308
-
(6,308)
-
-
-
Common shares repurchased (note 18)
(7,882)
-
1,157
-
-
(6,725)
Balance, December 31, 2025
1,987,665
12,859
199,643
(508,210)
(3,555)
1,688,402
Share
capital
Convertible
debentures
Contributed
surplus
Deficit
Non-
controlling
interest
Total
shareholders’
equity
Balance, December 31, 2023
1,952,241
-
187,034
(582,980)
101
1,556,396
Net income (loss) and comprehensive income (loss)
-
-
-
21,719
(1,607)
20,112
Share-based compensation (note 20(b))
-
-
4,950
-
-
4,950
Issuance of convertible debentures (note 13)
-
12,859
-
-
-
12,859
Settlement of Performance Share Units (note 18)
3,891
-
(4,962)
-
-
(1,071)
Common shares issued (note 18)
62,643
-
-
-
-
62,643
Common shares repurchased (note 18)
(29,536)
-
7,797
-
-
(21,739)
Balance, December 31, 2024
1,989,239
12,859
194,819
(561,261)
(1,506)
1,634,150
See accompanying Notes to the Consolidated Financial Statements
Advantage Energy Ltd. - 68
Advantage Energy Ltd.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
Year ended
December 31
Notes
2025
2024
Operating Activities
Income before taxes and non-controlling interest
75,715
32,917
Add (deduct) items not requiring cash:
Unrealized losses (gains) on derivatives
11
42,344
(4,315)
Share-based compensation expense
20
8,211
3,892
Depreciation and amortization expense
9,10
228,041
199,489
Accretion expense
13, 15, 16(c)
8,849
5,389
Interest paid-in-kind
15
5,135
3,547
Other expenses
8,10
944
1,548
Settlement of Performance Share Units
-
(1,071)
Expenditures on decommissioning liability
16(c)
(5,052)
(3,059)
Changes in non-cash working capital
26
(6,697)
(20,804)
Cash provided by operating activities
357,490
217,533
Financing Activities
Common shares repurchased
18
(6,725)
(21,739)
Common shares issued
18
-
62,105
Increase (decrease) in bank indebtedness
12
(57,431)
257,570
Net proceeds from convertible debentures
13
-
137,268
Net proceeds from unsecured debentures
15
132,550
51,472
Principal repayment of lease liability
16(b)
(1,076)
(785)
Principal repayment of financing liability
14
(5,255)
(4,814)
Cash provided by financing activities
62,063
481,077
Investing Activities
Natural gas and liquids assets additions
10
(290,398)
(266,744)
Carbon capture assets additions
10
(100,393)
(35,179)
Intangible assets additions
9
(988)
(1,135)
Business combinations and asset acquisitions
9,10
(31,117)
(445,274)
Asset dispositions
10
4,000
11,421
Changes in non-cash working capital
26
(3,068)
39,186
Cash used in investing activities
(421,964)
(697,725)
Increase (decrease) in cash and cash equivalents
(2,411)
885
Cash and cash equivalents, beginning of year
20,146
19,261
Cash and cash equivalents, end of year
17,735
20,146
Cash interest paid
47,077
43,484
Cash income taxes paid
-
-
See accompanying Notes to the Consolidated Financial Statements
Advantage Energy Ltd. - 69
Advantage Energy Ltd.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2025 and 2024
All tabular amounts expressed in thousands of Canadian dollars, except as otherwise indicated.
1. Business and structure of Advantage Energy Ltd.
Advantage Energy Ltd. and its subsidiaries (together “Advantage” or the “Corporation”) is an energy producer
with a significant position in the Western Canadian Sedimentary Basin. Additionally, the Corporation provides
carbon capture and storage ("CCS") solutions to emitters of carbon dioxide through its subsidiary, Entropy Inc.
("Entropy"). Advantage is domiciled and incorporated in Canada under the Business Corporations Act (Alberta).
Advantage’s head office address is 2200, 440 – 2nd Avenue SW, Calgary, Alberta, Canada. The Corporation’s
common shares and convertible debentures are listed on the Toronto Stock Exchange under the symbols “AAV”
and “AAV.DB”, respectively.
2. Basis of preparation
(a) Statement of compliance
The Corporation prepares its consolidated financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting
Standards" or "IFRS").
The accounting policies applied in these consolidated financial statements are based on IFRS issued and
outstanding as of March 5, 2026, the date the Board of Directors approved the statements.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except as detailed in
the Corporation’s accounting policies in note 3.
The methods used to measure fair values of derivative instruments are discussed in note 11.
(c) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the Corporation’s
functional currency.
Advantage Energy Ltd. - 70
3. Material accounting policies
The accounting policies set out below have been applied consistently to all years presented in these financial
statements and notes.
(a) Cash and cash equivalents
Cash consists of balances held with banks, and other short-term highly liquid investments with original
maturities of three months or less from inception.
(b) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Corporation. Control exists when the Corporation has power
to govern the financial and operating policies of the entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that currently are exercisable are taken into account. The
financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases.
These consolidated financial statements include the accounts of the Corporation and all subsidiaries
over which it has control, including Entropy, a private Canadian corporation of which Advantage owns
92% of the outstanding common shares (note 19). All inter-corporate balances, income and expenses
resulting from inter-corporate transactions are eliminated.
(ii) Joint arrangements
A portion of the Corporation’s natural gas and liquids activities involve joint operations. The
consolidated financial statements include the Corporation’s share of these joint operations and a
proportionate share of the relevant revenue and expenses.
(c) Financial instruments
Financial instruments are classified as amortized cost, fair value through other comprehensive income or
fair value through profit and loss. The Corporation’s classification of each identified financial instrument is
provided below:
Financial Instrument
Measurement Category
Cash and cash equivalents
Amortized cost
Trade and other receivables
Amortized cost
Derivative assets and liabilities
Fair value through profit and loss
Trade and other accrued liabilities
Amortized cost
Bank indebtedness
Amortized cost
Lease liability
Amortized cost
Financing liability
Amortized cost
Convertible debentures
Amortized cost
Unsecured debentures
Amortized cost
Unsecured debentures – derivative liability
Fair value through profit and loss
Advantage Energy Ltd. - 71
3. Material accounting policies (continued)
(c) Financial instruments (continued)
Derivative assets and liabilities
Derivative instruments executed by the Corporation to manage risk are classified as fair value through profit
and loss and are recorded in the Consolidated Statement of Financial Position as derivatives assets and
liabilities measured at fair value. Gains and losses on derivative instruments are recorded as gains and losses
on derivatives in the Consolidated Statement of Comprehensive Income in the period they occur. Gains and
losses on derivative instruments are comprised of cash receipts and payments associated with periodic
settlement that occurs over the life of the instrument, and non-cash gains and losses associated with
changes in the fair values of the instruments, which are remeasured at each reporting date.
Embedded derivatives are separated from the host contract and accounted for separately if the economic
characteristics, risks of the host contract and the embedded derivative are not closely related; a separate
instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
the combined instrument is not measured at fair value through profit and loss.
Advantage is party to natural gas supply agreements under which pricing is determined using a spark-spread
formula based on electricity prices, subject to a natural gas price collar in certain instances. As a result of
the spark-spread pricing mechanism and the natural gas price collar, these contracts contain an embedded
derivative. Advantage determined that the host contracts are natural gas sales arrangements with fixed
prices of US$2.50 and US$3.73 per MMbtu. The embedded derivatives are separately valued with changes
in fair value recognized through profit and loss.
Entropy’s unsecured debentures include an embedded derivative due to the equity conversion features.
The unsecured debentures are initially measured at fair value and are separated into their liability and
derivative components. The unsecured debentures liability is recorded in the Statement of Financial Position
at amortized cost. The unsecured debentures derivative liability, which represents the equity conversion
feature, is separately valued with changes in fair value recognized through profit and loss.
Convertible debentures
The convertible debentures are a non-derivative financial instrument that creates a financial liability of the
Corporation and grants an option to the holder of the instrument to convert it into common shares of the
Corporation. The liability component of the convertible debentures is initially recorded at the fair value of
a similar liability that does not have a conversion option. The equity component is recognized initially, net
of deferred income taxes, as the difference between gross proceeds and the fair value of the liability
component. Issuance costs are allocated to the liability and equity components in proportion to the
allocation of proceeds. Subsequent to initial recognition, the liability component of the convertible
debentures is measured at amortized cost using the effective interest method and is accreted each period,
such that the carrying value will equal the principal amount outstanding at maturity. The equity component
is not re-measured. The carrying amounts of the liability and equity components of the convertible
debentures are reclassified to share capital on conversion to common shares.
Advantage Energy Ltd. - 72
3. Material accounting policies (continued)
(c) Financial instruments (continued)
Impairment of Financial Assets
For the Corporation’s financial assets measured at amortized cost, loss allowances are determined based
on the expected credit loss ("ECL") over the asset’s lifetime. ECLs are a probability-weighted estimate of
credit losses, considering possible default events over the expected life of a financial asset. ECLs are
measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the
Corporation in accordance with the contract and the cash flows that the Corporation expects to receive)
over the life of the financial asset, discounted at the effective interest rate specific to the financial asset.
(d) Property, plant and equipment and exploration and evaluation assets
(i) Recognition and measurement
Exploration and evaluation costs
Pre-license costs are recognized in the Consolidated Statement of Comprehensive Income as incurred.
All exploration costs incurred subsequent to acquiring the right to explore for natural gas and liquids
before technical feasibility and commercial viability of the area have been established are capitalized.
Such costs can typically include costs to acquire land rights, geological and geophysical costs and
exploration well costs.
Exploration and evaluation costs are not depreciated and are accumulated by well, field or exploration
area and carried forward pending determination of technical feasibility and commercial viability.
The technical feasibility and commercial viability of extracting a mineral resource from exploration and
evaluation assets is considered to be generally determinable when proved or probable reserves are
determined to exist. Upon determination of proved or probable reserves, exploration and evaluation
assets attributable to those reserves are first tested for impairment and then reclassified from
exploration and evaluation assets to property, plant and equipment, net of any impairment loss.
Management reviews and assesses exploration and evaluation assets to determine if technical
feasibility and commercial viability exist. If Management decides not to continue the exploration and
evaluation activity, the unrecoverable costs are charged to exploration and evaluation expense in the
period in which the determination occurs.
Property, plant and equipment: Natural gas and liquids assets & Carbon capture assets
Property, plant and equipment includes natural gas and liquids assets and carbon capture assets. Items
of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses. Costs include lease acquisition, drilling and completion, production facilities,
decommissioning costs, geological and geophysical costs and directly attributable general and
administrative costs and share-based compensation related to development and production activities,
net of any government incentive programs.
Asset acquisitions
Where the Corporation acquires a group of assets that does not constitute a business under IFRS 3, the
transaction is accounted for as an asset acquisition. The purchase price and any directly attributable
transaction costs are allocated to the identifiable assets and liabilities acquired based on their relative
fair values at the date of acquisition. No goodwill is recognized in an asset acquisition.
Advantage Energy Ltd. - 73
3. Material accounting policies (continued)
(d) Property, plant and equipment and exploration and evaluation assets (continued)
(ii) Subsequent costs
Costs incurred subsequent to development and production that are significant are recognized as natural
gas and liquids properties only when they increase the future economic benefits embodied in the
specific asset to which they relate. All other expenditures are recognized in comprehensive income as
incurred. Such capitalized natural gas and liquids costs generally represent costs incurred in developing
proved and probable reserves and producing or enhancing production from such reserves, and are
accumulated on a field or area basis. The carrying amount of any replaced or sold component is
derecognized in accordance with our policies. The costs of the day-to-day servicing of property, plant
and equipment are recognized in comprehensive income as incurred.
(iii) Depreciation
A portion of the Corporation’s net carrying value of property, plant, and equipment is depreciated using
the units-of-production ("UOP") method by reference to the ratio of production in the period to the
related proved and probable reserves, taking into account estimated future development costs
necessary to bring those reserves into production. Future development costs are estimated taking into
account the level of development required to produce the reserves.
Significant natural gas processing plants and carbon capture equipment included in property, plant, and
equipment are depreciated using the straight-line method over the expected useful life. The estimated
useful lives for such depreciable assets are as follows:
Natural gas processing plants
50 years
Carbon capture equipment
20 - 50 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date by
Management.
(iv) Dispositions
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing
the proceeds from disposition with the carrying amount of property, plant and equipment and are
recognized net within processing and other income (expenses) in the Consolidated Statement of
Comprehensive Income.
(v) Impairment
The carrying amounts of the Corporation’s property, plant and equipment are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists,
the asset’s recoverable amount is estimated. For the purpose of impairment testing of property, plant
and equipment, assets are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of other assets or groups
of assets (the "cash-generating unit" or "CGU").
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine
technical feasibility and commercial viability, or facts and circumstances suggest that the carrying
amount exceeds the recoverable amount. Exploration and evaluation assets are allocated to CGUs or
groups of CGUs for the purposes of assessing such assets for impairment.
Advantage Energy Ltd. - 74
3. Material accounting policies (continued)
(d) Property, plant and equipment and exploration and evaluation assets (continued)
The recoverable amount of an asset or a CGU is the greater of its "value-in-use" and its "fair value less costs
of disposition". In assessing value-in-use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. Value-in-use is generally computed by reference to the present value of the
future cash flows expected to be derived from production of proved and probable reserves. Fair value less
costs of disposition is assessed utilizing market valuation based on an arm’s length transaction between
active participants. In the absence of any such transactions, fair value less costs of disposition is estimated
by discounting the expected after-tax cash flows of the CGUs at an after-tax discount rate that reflects the
risk of the properties in the CGUs. The discounted cash flow calculation is then increased by a tax-shield
calculation, which is an estimate of the amount that a
prospective buyer of the CGU would be entitled. The carrying value of the CGUs is reduced by the deferred
tax liability associated with its property, plant and equipment.
Impairment losses on property, plant and equipment are recognized in Comprehensive Income as an
impairment expense and are separately disclosed. An impairment of exploration and evaluation assets is
recognized as exploration and evaluation expense in Comprehensive Income.
(e) Intangible assets
Intangible assets consist of intellectual property, trade secrets and relevant knowledge of CCS technologies,
solvent and process development cost, internally developed software, customer contracts, and patents.
The Corporation incurs costs associated with research and development. Expenditures during the research
phase are expensed, while expenditures during the development phase are capitalized only if certain
criteria, including technical feasibility and the intent to develop and use the technology, are met. If these
criteria are not met, the costs are expensed as incurred.
Intangible assets acquired separately are initially measured at cost. Following initial recognition, intangible
assets are recognized at cost less any accumulated amortization and accumulated impairment losses.
Intangible assets are amortized over the estimated useful life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired.
The amortization expense on intangible assets is recognized in the statements of comprehensive income.
Amortization for intangible assets is recorded on a straight-line basis, once available for use, based on the
following useful lives:
Intellectual property
10 - 20 years
Development cost
10 - 20 years
Customer contracts
Over the life of the specific contract
Computer software
5 years
Patents
Over the life of the specific patent
Advantage Energy Ltd. - 75
3. Material accounting policies (continued)
(f) Business combinations
Business combinations are accounted for using the acquisition method. Identifiable assets acquired and
liabilities assumed in a business combination are measured at their fair values at the acquisition date. The
acquisition date is the closing date of the business combination. Revisions may be made to the initial
recognized amounts determined during the measurement period, which shall not exceed one year after the
acquisition date. The cost of an acquisition is measured as the fair value of the assets transferred, liabilities
incurred, and equity instruments issued. If the cost of the acquisition is greater than the fair value of the
net identifiable assets acquired, the difference is recorded as goodwill on the consolidated statements of
financial position. If the cost of the acquisition is less than the fair value of the net identifiable assets
acquired, the difference is recognized immediately in comprehensive income. Transaction costs associated
with a business combination are expensed as incurred.
(g) Decommissioning liability
A decommissioning liability is recognized if, as a result of a past event, the Corporation has a present legal
or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Decommissioning liabilities are determined by discounting
the expected future cash flows at a risk-free rate.
(h) Long-term compensation
(i) Share-based compensation
The Corporation accounts for share-based compensation based on the fair value of rights granted under
its share-based compensation plans.
Advantage’s Restricted and Performance Award Incentive Plan provides share-based compensation to
service providers. Awards granted under this plan, Performance Share Units, may be settled in cash or
in shares. As the Corporation generally intends to settle the awards in shares, the plan is considered
and accounted for as "equity-settled". Compensation costs related to Performance Share Units are
recognized as share-based compensation expense over the vesting period at fair value.
Entropy’s Stock Option Plan ("Stock Option Plan") authorizes the Board of Directors of Entropy to grant
Stock Options to service providers, including directors, officers, employees and consultants of
Advantage. Compensation costs related to the Stock Options are recognized as share-based
compensation expense over the vesting period at fair value.
As compensation expense is recognized, contributed surplus is recorded until the Performance Share
Units vest or Stock Options are exercised, at which time the appropriate common shares are then
issued to the service providers and the contributed surplus is transferred to share capital.
(ii) Performance Awards
Advantage’s Performance Award Incentive Plan allows the Corporation to grant cash Performance
Awards to service providers. The present value of payments to be made under the Performance Award
Incentive Plan are recognized as general and administrative expense as the corresponding service is
provided by the service provider. A liability is recognized for the amount expected to be paid if the
Corporation has a present legal or constructive obligation to pay this amount, as a result of past service
provided by the service provider, and the obligation can be estimated reliably.
Advantage Energy Ltd. - 76
3. Material accounting policies (continued)
(h) Long-term compensation (continued)
(iii) Deferred Share Units ("DSU")
DSUs are issued to Directors of Advantage. Each DSU entitles participants to receive cash equal to the
price of the Corporation’s common shares, multiplied by the number of DSUs held. All DSUs vest
immediately upon grant and become payable upon retirement of the Director from the Board. A liability
for the expected cash payments is accrued over the life of the DSU using the fair value method based
on the Corporation’s share market price at the end of each reporting period, with the associated
expense charged to general and administrative expense.
(i) Revenue
The Corporation’s revenue is comprised of natural gas and liquids sales to customers under fixed and
variable volume contracts, sales of purchased natural gas, and processing income earned under fixed fee
contracts.
Natural gas and liquids sales and sales of purchased natural gas are recognized at a point in time when the
Corporation has satisfied its performance obligations which occurs upon the delivery of production to the
customer. The transaction price used to determine revenue from natural gas and liquids sales is the market
price, net of any marketing, transportation and fractionation fees for sales as specified in the contract. For
fixed basis physical delivery contracts, the Corporation records revenue net of the fixed basis differential.
Processing income is recognized when the Corporation has satisfied its performance obligation which occurs
as each unit of raw gas is handled and processed by Advantage. The transaction price Advantage charges
third-parties is a fixed charge per unit processed, as negotiated with the counterparty and set out pursuant
to the applicable agreement.
Payments are normally received from customers within 30 days following the end of the production month.
The Corporation does not have any long-term contracts with unfulfilled performance obligations and does
not disclose information about remaining performance obligations with an original expected duration of 12
months or less.
(j) Income tax
Income tax expense or recovery comprises current and deferred income tax and is recognized in income or
loss except to the extent that it relates to items recognized directly in shareholders’ equity.
Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to income tax payable in respect of
previous years.
Deferred income tax is recognized using the liability method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred income tax is not recognized on the initial recognition of assets or liabilities in
a transaction that is not a business combination, and at the time of the transaction, affects neither
accounting income nor taxable income and does not give rise to equal taxable and deductible temporary
differences. Deferred income tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted by the
reporting date.
Advantage Energy Ltd. - 77
3. Material accounting policies (continued)
(j) Income Tax (continued)
A deferred income tax asset is recognized to the extent that it is probable that future taxable profits will be
available against which the temporary difference can be utilized. Deferred income tax assets are reviewed
at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realized. Deferred income tax assets and liabilities are only offset when they are within the same
legal entity and same tax jurisdiction. Deferred income tax assets and liabilities are presented as non-
current.
(k) Net income per share attributable to Advantage shareholders
Net income per basic share is calculated by dividing the net income attributable to common shareholders
of Advantage by the weighted average number of common shares outstanding during the period. Net
income per diluted share is determined by adjusting the net income attributable to common shareholders
and the weighted average number of common shares outstanding for the effects of potential dilutive
instruments such as Performance Share Units and convertible debentures.
(l) Share capital
Financial instruments issued by the Corporation are classified as equity only to the extent that they do not
meet the definition of a financial liability or financial asset. Incremental costs directly attributable to the
issue of shares and share options are recognized as a deduction from equity. Common shares repurchased
by the Corporation are treated as a reduction of share capital based on the average carrying value of the
common shares, with the difference between the repurchase price and average carrying value recognized
as contributed surplus.
(m) Government grants and investment tax credits
The Corporation may receive government grants which provide financial assistance for capital expenditures
or expenses to be incurred. Government grants are recognized when there is reasonable assurance that the
Corporation will comply with conditions attached to them and the grants will be received. The Corporation
recognizes government grants in the Consolidated Statement of Comprehensive Income or the Consolidated
Statement of Financial Position on a systematic basis and in line with recognition of the expenditure that
the grants are intended to compensate.
Investment tax credits relating to Scientific Research and Experimental Development claims are considered
an income tax credit and are offset against our income tax expense when they become probable of
realization.
Under the Government of Canada’s refundable investment tax credit for Carbon Capture, Utilization and
Storage ("CCUS") program, the Corporation is eligible to recover a portion of its capital expenditures on
qualified CCUS projects. Investment tax credits under this program are recorded as a reduction to property,
plant, and equipment. Claims for investment tax credits are accrued upon the Corporation attaining
reasonable assurance of collections from the Canada Revenue Agency.
(n) Contingent Liabilities
Contingent liabilities are not recognized in the financial statements, if not estimable and probable, and are
disclosed in the notes to the financial statements unless their occurrence is remote. Contingent assets are
not recognized in the financial statements, but are disclosed in the notes to the financial statements if their
recovery is deemed probable.
Advantage Energy Ltd. - 78
3. Material accounting policies (continued)
(o) Segment reporting
An operating segment is a component of the Corporation that engages in business activities from which it
may earn revenues and incur expenses, including revenues and expenses that relate to transactions with
any of the Corporation’s other operating segments. All operating segment’s operating results are reviewed
regularly by the management teams of Advantage and Entropy, including the Chief Executive Officers
("CEOs"), Chief Financial Officers ("CFOs") and other Vice Presidents ("VPs") to make decisions and assess
its performance for which discrete financial information is available.
(p) Newly adopted accounting policies
Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures
On May 30, 2024, the IASB issued targeted amendments to IFRS 9, “Financial Instruments”, and IFRS 7,
“Financial Instruments: Disclosures”. The amendments include new requirements not only for financial
institutions but also for corporate entities which include clarifying the date of recognition and derecognition
of some financial assets and liabilities, with a new exception for some financial liabilities settled through an
electronic cash transfer system. These new requirements will apply at January 1, 2026, with early application
permitted.
The Corporation early adopted the amendments of IFRS 9 and IFRS 7 on the Consolidated Financial
Statements at December 31, 2025, with no material impact.
(q) Future accounting pronouncements
IFRS 18 Presentation and Disclosure in Financial Statements
On April 9, 2024, the International Accounting Standards Board (“IASB”) issued IFRS 18, Presentation and
Disclosure in Financial Statements (“IFRS 18”), which replaces IAS 1, Presentation of Financial Statements.
IFRS 18 introduces a revised structure for the statement of profit or loss, including defined categories for
operating, investing and financing activities, as well as enhanced principles for aggregation and
disaggregation. The change in the statement of profit or loss will impact the statement of cash flows by
revising the determination of cash flows from operating activities, financing activities and investing
activities. The standard also introduces new disclosure requirements related to management-defined
performance measures (“MPMs”), with the objective of improving the comparability and transparency of
financial performance across entities and reporting periods. IFRS 18 is effective for annual reporting periods
beginning on or after January 1, 2027, with early adoption permitted. The standard is required to be applied
retrospectively, subject to certain transition provisions.
The Corporation has commenced its implementation planning for IFRS 18. As part of this process, the
Corporation has performed a preliminary assessment of changes to the presentation of its Consolidated
Statements of Income, including mapping existing income and expense line items to the new operating,
investing and financing categories required under IFRS 18. In addition, the Corporation is in the process of
identifying performance measures used in external communications that may meet the definition of MPMs
and assessing the related disclosure requirements. The Corporation continues to evaluate the impact of
adopting IFRS 18 and expects to provide enhanced disclosures, including updates related to financial
statement presentation and MPMs in 2026.
Advantage Energy Ltd. - 79
4.
Material accounting judgments, estimates and assumptions
The preparation of consolidated financial statements in conformity with IFRS requires Management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates, and
differences could be material. Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any
future years affected. Material estimates and judgments made in the preparation of the consolidated financial
statements are outlined below.
(a) Reserves base
A portion of the Corporation’s property, plant, and equipment is depreciated on a UOP basis at a rate
calculated by reference to proved and probable reserves determined in accordance with National
Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" and incorporating the estimated
future cost of developing and extracting those reserves. Proved and probable reserves are estimated by an
independent qualified reserve evaluator and determined using estimated future development costs,
expected future rates of production and future natural gas and liquids prices. Future development costs are
estimated using assumptions as to the number of wells required to produce the reserves, the cost of such
wells and associated production facilities and other capital costs.
(b) Determination of cash generating unit
The Corporation’s assets are required to be aggregated into CGUs for the purpose of calculating impairment
based on their ability to generate largely independent cash inflows. Factors considered in the classification
include the integration between assets, shared infrastructure, the existence of common sales points,
geography and geologic structure. The classification of assets and allocation of corporate assets into CGUs
requires significant judgment and may impact the carrying value of the Corporation’s assets in future
periods.
(c) Indicators of impairment and calculation of impairment
At each reporting date, Advantage assesses whether there are circumstances that indicate a possibility that
the carrying values of exploration and evaluation assets and property, plant and equipment are not
recoverable, or impaired. Such circumstances include, but are not limited to, incidents of physical damage,
deterioration of commodity prices, changes in the regulatory environment, a reduction in estimates of
proved and probable reserves, or significant increases to expected costs to produce and transport reserves.
When Management judges that circumstances indicate potential impairment, property, plant, and
equipment are tested for impairment by comparing the carrying values to their recoverable amounts. The
recoverable amounts of CGUs are determined based on the higher of value-in-use calculations and fair
values less costs of disposition. These calculations require the use of estimates and assumptions, that are
subject to change as new information becomes available including information on future commodity prices,
expected production volumes, quantities of reserves, discount rates, future development costs and
operating costs.
Advantage Energy Ltd. - 80
4. Material accounting judgements, estimates and assumptions (continued)
(d) Derivative assets and liabilities
Derivative assets and liabilities are recorded at their fair values at the reporting date, with gains and losses
recognized directly into comprehensive income in the same period. The fair value of derivatives outstanding
is an estimate based on pricing models, estimates, assumptions, and market data available at that time. As
such, the recognized amounts are non-cash items and the actual gains or losses realized on eventual cash
settlement can vary materially due to subsequent fluctuations in market prices as compared to the valuation
assumptions.
For embedded derivatives, Management determines the definition of the host contract and the separate
embedded derivative. The judgments made in determining the host contract can influence the fair value of
the embedded derivative. Determining the fair value of the embedded derivatives requires judgments
related to the choice of a pricing model, estimates of volatility, and market data available at that time. Any
changes in the estimates or inputs utilized to determine fair value could result in a significant impact on the
Corporation’s future operating results.
(e) Unsecured debentures
Determining the fair value of unsecured debentures requires judgments related to the choice of a pricing
model, the estimation of share price, timing and probability of an Initial Public Offering ("IPO"), credit
spread, volatility, interest rates, and the expected term of the underlying instruments. Any changes in the
estimates or inputs utilized to determine fair value could result in a significant impact on the Corporation’s
future operating results.
(f) Share-based compensation
The Corporation’s share-based compensation expense is subject to measurement uncertainty as a result of
estimates and assumptions related to the expected performance multiplier, forfeiture rates, expected life,
market-based vesting conditions and underlying volatility of the price of the Corporation’s common shares.
(g) Decommissioning liability
Decommissioning costs will be incurred by the Corporation at the end of the operating life of the
Corporation’s facilities and properties. The ultimate decommissioning liability is uncertain and can vary in
response to many factors including changes to relevant legal requirements, the emergence of new
restoration techniques, experience at other production sites, or changes in the risk-free discount rate. The
expected timing and amount of expenditure can also change in response to changes in reserves or changes
in laws and regulations or their interpretation. As a result, there could be significant adjustments to the
provisions established which would affect future financial results.
(h) Income taxes
Income tax laws and regulations are subject to change. Deferred tax liabilities that arise from temporary
differences between recorded amounts on the statement of financial position and their respective tax bases
will be payable in future periods. Deferred tax assets that arise from temporary differences between
recorded amounts on the statement of financial position and their respective tax bases are recognized to
the extent that it is probable that future taxable profit will be available against which the deductible
temporary differences and the carryforward of unused tax losses can be utilized. The amount of a deferred
tax asset or liability is subject to Management’s best estimate of when a temporary difference will reverse
and expected changes in income tax rates. These estimates by nature involve significant measurement
uncertainty.
Advantage Energy Ltd. - 81
4. Material accounting judgements, estimates and assumptions (continued)
(i) Business combinations
Business combinations are accounted for using the acquisition method of accounting. The determination of
fair value often requires management to make assumptions and estimates about future events. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their acquisition date fair values. The fair value of the property, plant and equipment and
exploration and evaluation assets were based on a discounted cash flow model, calculating the present
value of the expected future after-tax cash flows derived from the acquired oil and gas reserves as prepared
by our internal qualified reserve engineers. The assumptions and estimates with respect to determining the
fair value of property, plant and equipment and exploration and evaluation assets acquired generally require
the most judgment and include estimates of oil and gas reserves acquired, production forecasts, timing and
amounts of future development costs, production costs, forecast benchmark commodity prices and
discount rate. Changes in any of the assumptions or estimates used in determining the fair value of acquired
assets and liabilities could impact the amounts assigned to assets, liabilities and goodwill. Future net
earnings can be affected as a result of changes in future depreciation, asset impairment or goodwill
impairment.
(j) Contingent liabilities
The Corporation may be subject to contingent liabilities that arise from contractual arrangements or other
events, the existence and amount of which depend on the occurrence of future events that are not wholly
within the Corporation’s control. Management exercises judgment in assessing the likelihood of these
contingent obligations arising and in determining whether a provision should be recognized or disclosure
provided.
Advantage Energy Ltd. - 82
5. Segmented reporting
The Corporation has the following two key reportable operating segments, being Advantage and Entropy, based
on the nature of each entity’s business activities.
Advantage (natural gas and liquids producer)
Advantage is engaged in the business of natural gas, crude oil and liquids production from its Montney and
Charlie Lake resource plays in Alberta and B.C.
Entropy (carbon capture and storage)
Entropy provides carbon capture and storage solutions to emitters of carbon dioxide and is pursuing a global
business strategy. Entropy currently captures and sequesters carbon at Advantage’s Glacier Gas Plant.
The segments were identified by the differences in products and services that each entity creates and sells to
customers. Additionally, Advantage and Entropy are separately financed segments, with the unsecured
debentures issued by Entropy being non-recourse to Advantage. Inter-segment sales and expenses are recorded
at prevailing market prices at the date of transaction and are eliminated on consolidation in order to arrive at
net income and comprehensive income in accordance with IFRS.
Adjusted funds flow
The Corporation considers adjusted funds flow to be a useful measure of the Corporation’s ability to generate
cash from its operations, which may be used to settle outstanding debt and obligations, support future capital
expenditures plans, or return capital to shareholders. Changes in non-cash working capital are excluded from
adjusted funds flow as they may vary significantly between periods and are not considered to be indicative of
the Corporation’s operating performance as they are a function of the timeliness of collecting receivables and
paying payables. Expenditures on decommissioning liabilities are excluded from the calculation as the amount
and timing of these expenditures are unrelated to current production and are partially discretionary due to the
nature of our low liability. Adjusted funds flow does not have any standardized meaning prescribed under IFRS
and therefore may not be comparable to similar measures presented by other entities. A reconciliation of the
most directly comparable financial measure has been provided below:
Year ended
December 31
($000)
2025
2024
Cash provided by operating activities
357,490
217,533
Expenditures on decommissioning liability
5,052
3,059
Changes in non-cash working capital
6,697
20,804
Adjusted funds flow
369,239
241,396
The Corporation’s chief operating decision makers regularly reviews adjusted funds flow generated by each of
the Corporation’s operating segments. Adjusted funds flow is a measure of profit or loss that provides the chief
operating decision makers with the ability to assess the profitability of each operating segment.
Advantage Energy Ltd. - 83
5. Segmented reporting (continued)
The following table is a summary of the segmented results:
As at December 31, 2025
Advantage
Entropy
Inter-
Segment
Eliminations
Consolidated
Total assets
2,866,734
252,630
(48,349)
3,071,015
Total liabilities
(1,113,011)
(277,895)
8,293
(1,382,613)
Net debt
549,092
257,596
-
806,688
For the year ended December 31, 2025
Cash provided by (used in) operating activities
362,487
(4,997)
-
357,490
Cash provided by (used in) financing activities
(70,305)
132,368
-
62,063
Cash used in investing activities
296,653
125,311
-
421,964
Net capital expenditures
287,698
131,198
-
418,896
Adjusted funds flow for the year ended December 31, 2025
Natural gas and liquids sales
698,984
-
-
698,984
Sales of purchased natural gas
1,121
-
-
1,121
Processing and other income
3,114
6,035
(3,315)
5,834
Royalty expense
(60,105)
-
-
(60,105)
Realized gains on derivatives
81,797
-
-
81,797
Total revenues (excluding unrealized gains and losses)
724,911
6,035
(3,315)
727,631
Operating expense
(152,466)
(2,079)
-
(154,545)
Transportation expense
(116,387)
-
-
(116,387)
Natural gas purchases
556
-
-
556
General and administrative expense
(23,123)
(17,228)
-
(40,351)
Interest (expense) income
(48,072)
995
-
(47,077)
Other (expenses) income
(3,837)
(66)
3,315
(588)
Adjusted funds flow
381,582
(12,343)
-
369,239
Reconciliation to net income (loss) for the year ended December 31, 2025
Adjusted funds flow
381,582
(12,343)
-
369,239
Unrealized gains (losses) on derivatives
(42,679)
335
-
(42,344)
Share-based compensation expense
(8,145)
(66)
-
(8,211)
Depreciation and amortization expense
(223,606)
(5,608)
1,173
(228,041)
Interest paid-in-kind
-
(5,135)
-
(5,135)
Accretion expense
(5,443)
(3,406)
-
(8,849)
Other expenses
(944)
-
-
(944)
Income tax expense
(24,713)
-
-
(24,713)
Net income (loss)
76,052
(26,223)
1,173
51,002
Advantage Energy Ltd. - 84
5. Segmented reporting (continued)
As at December 31, 2024
Advantage
Entropy
Inter-
Segment
Eliminations
Consolidated
Total assets
2,872,532
117,724
(44,298)
2,945,958
Total liabilities
1,198,052
116,825
(3,069)
1,311,808
Net debt
625,551
92,898
-
718,449
For the year ended December 31, 2024
Cash provided by (used in) operating activities
228,965
(11,432)
-
217,533
Cash provided by financing activities
429,764
51,313
-
481,077
Cash used in investing activities
667,101
30,624
-
697,725
Net capital expenditures
700,597
36,314
-
736,911
Adjusted funds flow for the year ended December 31, 2024
Natural gas and liquids sales
543,295
-
-
543,295
Processing and other income
5,557
4,467
(3,217)
6,807
Royalty expense
(52,471)
-
-
(52,471)
Realized gains on derivatives
51,127
-
-
51,127
Total revenues (excluding unrealized gains and losses)
547,508
4,467
(3,217)
548,758
Operating expense
(123,226)
(2,521)
-
(125,747)
Transportation expense
(101,139)
-
-
(101,139)
General and administrative expense
(22,018)
(11,066)
-
(33,084)
Transaction costs
(3,276)
-
-
(3,276)
Interest (expense) income
(43,925)
441
-
(43,484)
Other (expenses) income
(3,893)
44
3,217
(632)
Adjusted funds flow
250,031
(8,635)
-
241,396
Reconciliation to net income (loss) for the year ended December 31, 2024
Adjusted funds flow
250,031
(8,635)
-
241,396
Unrealized gains (losses) on derivatives
5,181
(866)
-
4,315
Share-based compensation expense
(3,665)
(227)
-
(3,892)
Depreciation and amortization expense
(194,583)
(6,031)
1,125
(199,489)
Interest paid-in-kind
-
(3,547)
-
(3,547)
Accretion expense
(4,130)
(1,259)
-
(5,389)
Settlement of performance share units in cash
1,071
-
-
1,071
Other expenses
(1,548)
-
-
(1,548)
Income tax expense
(12,805)
-
-
(12,805)
Net income (loss)
39,552
(20,565)
1,125
20,112
Advantage Energy Ltd. - 85
6. Cash and cash equivalents
December 31
2025
December 31
2024
Cash at financial institutions
17,735
20,146
Cash at financial institutions earn interest at floating rates based on daily deposit rates. As at December 31, 2025
cash at financial institutions included US$0.5 million (December 31, 2024 – US$0.2 million). The Corporation
only deposits cash with major financial institutions of high-quality credit ratings. Included in cash and cash
equivalents as at December 31, 2025 is $16.6 million held by Entropy (December 31, 2024 - $14.5 million).
7. Trade and other receivables
December 31
2025
December 31
2024
Trade receivables
81,870
79,561
Receivables from joint venture partners
3,103
3,627
84,973
83,188
8. Inventory
Balance at December 31, 2023
3,958
Revaluation
199
Sale of linefill
(620)
Balance at December 31, 2024
3,537
Revaluation
(944)
Additions
465
Sale of linefill
(510)
Balance at December 31, 2025
2,548
9. Intangible assets
Cost
Balance at December 31, 2023
5,476
Additions
1,135
Balance at December 31, 2024
6,611
Asset acquisition
17,200
Additions
988
Balance at December 31, 2025
24,799
Accumulated amortization
Balance at December 31, 2023
113
Amortization
1,252
Balance at December 31, 2024
1,365
Amortization
658
Balance at December 31, 2025
2,023
Net book value
At December 31, 2024
5,246
At December 31, 2025
22,776
During the year ended December 31, 2025, Entropy acquired certain carbon hub assets in Saskatchewan for cash
consideration of $29.8 million, consisting of $17.2 million in intangible assets and $12.6 million in carbon capture
assets (Note 10).
Advantage Energy Ltd. - 86
10. Natural gas and liquids properties
Cost
Right
-of-use
assets
Exploration
and
evaluation
assets
Natural gas
and liquids
assets
Carbon
capture
assets
Total
Balance at December 31, 2023
3,253
15,961
3,456,026
39,609
3,514,849
Additions
1,366
-
266,744
35,179
303,289
Business combination
272
6,838
466,705
-
473,815
Asset dispositions(1)
-
-
(11,421)
-
(11,421)
Capitalized share-based compensation (note 20)
-
-
1,058
-
1,058
Capitalized interest paid-in-kind (note 15)
-
-
-
1,646
1,646
Changes in decommissioning liability (note 16)
-
-
37,373
(126)
37,247
Transfers
-
(5,879)
5,879
-
-
Lease expiries
-
(1,747)
-
-
(1,747)
Expired right-of-use assets
(73)
-
-
-
(73)
Balance at December 31, 2024
4,818
15,173
4,222,364
76,308
4,318,663
Additions
1,163
-
290,398
100,393
391,954
Asset acquisition
-
-
1,300
12,617
13,917
Asset dispositions(1)
-
-
(4,000)
-
(4,000)
Capitalized share-based compensation (note 20)
-
-
1,764
-
1,764
Capitalized interest paid-in-kind (note 15)
-
-
-
9,286
9,286
Changes in decommissioning liability (note 16)
-
-
(22,211)
(446)
(22,657)
Transfers
-
(318)
318
-
-
Expired right-of-use assets
(329)
-
-
-
(329)
Balance at December 31, 2025
5,652
14,855
4,489,933
198,158
4,708,598
Accumulated depreciation
Balance at December 31, 2023
1,523
-
1,423,881
243
1,425,647
Depreciation
823
-
193,918
3,496
198,237
Expired right-of-use assets
(73)
-
-
-
(73)
Balance at December 31, 2024
2,273
-
1,617,799
3,739
1,623,811
Depreciation
1,073
-
222,724
3,586
227,383
Expired right-of-use assets
(329)
-
-
-
(329)
Balance at December 31, 2025
3,017
-
1,840,523
7,325
1,850,865
Net book value
At December 31, 2024
2,545
15,173
2,604,565
72,569
2,694,852
At December 31, 2025
2,635
14,855
2,649,410
190,833
2,857,733
(1) Advantage disposed of non-core assets in 2025 and 2024 that were acquired through the business combination in 2024. These assets were
removed from property, plant and equipment with no gain or loss recognized.
During the year ended December 31, 2025, the Corporation capitalized general and administrative expenditures
directly related to natural gas and liquids assets and carbon capture assets of $6.0 million and $1.0 million,
respectively, included in additions (year ended December 31, 2024 - $6.9 million and $0.8 million).
Advantage included future development costs of $2.7 billion (December 31, 2024 - $2.8 billion) in natural gas and
liquids properties costs subject to depreciation.
Advantage Energy Ltd. - 87
10. Natural gas and liquids properties (continued)
As at December 31, 2025, the Corporation had $61.7 million of natural gas and liquids assets and $147.5 million
of carbon capture assets classified as assets under development, which are not yet available for use and
therefore not subject to depreciation.
For the year ended December 31, 2025, the Corporation evaluated its property, plant and equipment and
exploration and evaluation assets for indicators of any potential impairment. As a result of this assessment, no
indicators were identified, and no impairment test was performed.
11. Financial risk management
Financial assets and liabilities recorded or disclosed at fair value in the statements of financial position are
categorized based on the level associated with the inputs used to measure their fair value.
Fair value is determined following a three-level hierarchy:
Level 1: Quoted prices in active markets for identical assets and liabilities. The Corporation does not have
any financial assets or liabilities that require Level 1 inputs.
Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or
indirectly. Such inputs can be corroborated with other observable inputs for substantially the complete term
of the contract.
Derivative assets and liabilities are categorized as Level 2 in the fair value hierarchy and measured at fair
value on a recurring basis. For derivative assets and liabilities, pricing inputs include quoted forward prices
for commodities, foreign exchange rates, interest rates, volatility, and risk-free rate discounting, all of which
can be observed or corroborated in the marketplace. The actual gains and losses realized on eventual cash
settlement can vary materially due to subsequent fluctuations as compared to the valuation assumptions.
Level 3: Fair value is determined using inputs that are not observable.
Natural gas embedded derivatives are categorized as Level 3 in the fair value hierarchy as the volatility
derived from historic PJM electricity prices and the long-term portion of the PJM electricity forward price
are unobservable inputs.
Entropy’s unsecured debentures – derivative liability is categorized as Level 3 in the fair value hierarchy as
multiple inputs such as volatility, probability of a future change of control event and share price are
unobservable inputs.
The Corporation’s activities expose it to a variety of financial risks that arise as a result of its exploration,
development, production, and financing activities such as:
•
credit risk;
•
liquidity risk;
•
commodity price risk;
•
interest rate risk; and
• foreign exchange risk.
Advantage Energy Ltd. - 88
11. Financial risk management (continued)
The Corporation enters into financial risk management derivative contracts to manage exposure to commodity
price risk and foreign exchange risk. The table below summarizes the realized gains (losses) and unrealized gains
(losses) on derivatives recognized in net income.
Year ended
December 31
2025
2024
Realized gains (losses) on derivatives
Natural gas
53,759
47,642
Crude oil
18,780
6,493
Foreign exchange
126
(101)
Natural gas embedded derivative
9,132
(2,907)
Total
81,797
51,127
Unrealized gains (losses) on derivatives
Natural gas
(2,524)
4,496
Crude oil
(4,693)
7,052
Foreign exchange
741
(1,634)
Natural gas embedded derivative
(36,203)
(4,733)
Unsecured debentures – derivative liability
335
(866)
Total
(42,344)
4,315
Gains (losses) on derivatives
Natural gas
51,235
52,138
Crude oil
14,087
13,545
Foreign exchange
867
(1,735)
Natural gas embedded derivative
(27,071)
(7,640)
Unsecured debentures – derivative liability
335
(866)
Total
39,453
55,442
Advantage Energy Ltd. - 89
11. Financial risk management (continued)
The fair value of financial risk management derivatives has been allocated to current and non-current assets
and liabilities based on the expected timing of cash settlements. The following table summarizes the estimated
fair market value of outstanding financial risk management derivative contracts.
December 31
2025
December 31
2024
Derivative type
Natural gas derivative asset
24,680
27,204
Crude oil derivative asset
2,359
7,052
Foreign exchange derivative liability
-
(741)
Natural gas embedded derivative asset
45,747
81,950
Unsecured debentures (note 15)
(91,684)
(40,344)
Net derivative asset (liability)
(18,898)
75,121
Consolidated statement of financial position classification
Current derivative asset
34,834
50,358
Non-current derivative asset
39,400
78,631
Current derivative liability
(402)
(8,900)
Non-current derivative liability
(1,046)
(4,624)
Unsecured debentures (note 15)
(91,684)
(40,344)
Net derivative asset (liability)
(18,898)
75,121
(a) Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, which arises principally from the Corporation’s receivables from natural gas and
liquids marketers and companies with whom we enter into derivative contracts. The maximum exposure to
credit risk is as follows:
December 31
2025
December 31
2024
Trade and other receivables
84,973
83,188
Deposits
4,995
5,713
Derivative assets
74,234
128,989
164,202
217,890
Trade and other receivables, deposits, and derivative assets are subject to credit risk exposure and the
carrying values reflect Management’s assessment of the associated maximum exposure to such credit risk.
Advantage mitigates such credit risk by closely monitoring significant counterparties and dealing with a
broad selection of counterparties that diversify risk within the sector. The majority of the Corporation’s
deposits are due from the Alberta Provincial government and are viewed by Management as having minimal
associated credit risk. To the extent that Advantage enters derivatives to manage commodity price risk and
foreign exchange risk, it may be subject to credit risk associated with counterparties with which it contracts.
Credit risk is mitigated by entering contracts with only stable, creditworthy parties and through frequent
reviews of exposures to individual entities. The Corporation only enters derivative contracts with major
banks and international energy firms to further mitigate associated credit risk. In addition, the Corporation
has an embedded derivative with a US power company with a remaining term of 10 years (note 11(c)).
Advantage Energy Ltd. - 90
11. Financial risk management (continued)
(a) Credit risk (continued)
Substantially all of the Corporation’s trade and other receivables are due from customers concentrated in
the North American oil and gas industry. As such, trade and other receivables are subject to normal industry
credit risks. As at December 31, 2025, $1.7 million of trade and other receivables are outstanding for 90
days or more (December 31, 2024 – $1.2 million). The Corporation believes the entire balance is collectible,
and in some instances can mitigate risk through withholding production or offsetting payables with the
same parties. At December 31, 2025, the average expected credit loss for trade and other receivables was
0.51% (December 31, 2024 – 1.09%).
(b) Liquidity risk
The Corporation is subject to liquidity risk attributed from trade and other accrued liabilities, derivative
liabilities, lease liabilities, performance awards, deferred share units, financing liabilities, convertible
debentures, unsecured debentures and bank indebtedness. Trade and other accrued liabilities are all due
within one year of the Consolidated Statement of Financial Position date. The Corporation’s Performance
Awards are all payable within one to three years of the Consolidated Statement of Financial Position date.
The Corporation’s deferred share units become payable on retirement of a director from the Board. The
Corporation’s lease liability and financing liability are settled in a systematic basis over their respective
terms and will be settled over the next five and ten years, respectively. Advantage does not anticipate any
problems in satisfying these obligations from cash provided by operating activities and the existing credit
facilities.
The Corporation’s convertible debentures have an aggregate principal amount of $143.8 million and will
mature and be repayable on June 30, 2029. The convertible debentures will accrue interest at the rate of
5.0% per annum payable semi-annually in arrears on June 30 and December 31 of each year. Advantage
does not anticipate any liquidity issues with regards to settling the semi-annual interest payments, and the
principal balance of the convertible debentures at time of maturity. Advantage also has the option to settle
the principal and interest of the convertible debentures in shares subject to the terms of the convertible
debenture indenture.
The Corporation’s bank indebtedness is subject to $650 million of credit facility agreements. Although the
credit facilities are a source of liquidity risk, the facilities also mitigate liquidity risk by enabling Advantage
to manage interim cash flow fluctuations. The terms of the credit facilities are such that they provide
Advantage adequate flexibility to evaluate and assess liquidity issues if and when they arise. Additionally,
the Corporation regularly monitors liquidity related to obligations by evaluating forecasted cash flows,
optimal debt levels, capital spending activity, working capital requirements, and other potential cash
expenditures. This continual financial assessment process further enables the Corporation to mitigate
liquidity risk.
The unsecured convertible debentures held by Entropy are non-recourse to Advantage and are to be repaid
by Entropy at the end of the 10-year terms, if not exchanged for common shares. The unsecured non-
convertible debentures are non-recourse to Advantage and have a term of five years from the date of
issuance, including provisions permitting early repayment. Both the convertible and non-convertible
unsecured debentures held by Entropy bear interest that can be paid-in-kind at the discretion of Entropy.
Advantage Energy Ltd. - 91
11. Financial risk management (continued)
(b) Liquidity risk (continued)
To the extent that Advantage enters derivatives to manage commodity price risk, it may be subject to
liquidity risk as derivative liabilities become due. While the Corporation has elected not to follow hedge
accounting, derivative instruments are not entered for speculative purposes and Management closely
monitors existing commodity risk exposures. As such, liquidity risk is mitigated since any losses realized are
offset by increased cash flows realized from the higher commodity price environment.
The timing of undiscounted cash outflows and contractual maturities relating to financial liabilities as at
December 31, 2025 and 2024 are as follows:
December 31, 2025
Undiscounted
cash flows(3)
2026
2027 to 2029
2030 and
beyond
Trade and other accrued liabilities
109,248
109,248
-
-
Deferred Share Units
5,175
5,175
-
-
Derivative liability
1,448
402
1,046
-
Performance Awards
5,621
1,948
3,673
-
Lease liability
3,195
1,473
1,722
-
Financing liability
123,992
13,050
39,185
71,757
Convertible debentures - principal
143,750
-
143,750
-
- interest
25,146
7,188
17,958
-
Bank indebtedness - principal
415,000
-
415,000
-
- interest (1)
34,976
23,319
11,657
-
Unsecured debentures - principal(2)
254,421
-
254,421
- interest (2)
173,717
20,640
61,919
91,158
1,295,689
182,443
695,910
417,336
(1)
Interest on bank indebtedness was calculated assuming conversion of the revolving credit facility to a one-year term facility at
the next annual facility review.
(2)
The unsecured debentures and non-convertible unsecured debentures are liabilities of Entropy and are non-recourse to
Advantage. Interest can be paid-in-kind, or cash, at the discretion of Entropy.
(3)
The undiscounted cash flows equal the carrying value, with the exception of performance awards, lease liability, financing
liability, convertible debentures, and unsecured debentures.
Advantage Energy Ltd. - 92
11. Financial risk management (continued)
(b) Liquidity risk (continued)
December 31, 2024
Undiscounted
cash flows(3)
2026
2027 to 2029
2030 and
beyond
Trade and other accrued liabilities
116,609
116,609
-
-
Deferred Share Units
4,869
4,869
-
-
Derivative liability
13,524
8,900
4,624
-
Performance Awards
4,995
1,187
3,808
-
Lease liability
3,252
1,195
1,946
111
Financing liability
137,041
13,050
39,185
84,806
Convertible debentures - principal
143,750
-
-
143,750
- interest
32,334
7,188
21,582
3,564
Bank indebtedness - principal
475,000
-
475,000
-
- interest (1)
46,955
31,303
15,652
-
Unsecured debentures - principal(2)
101,000
-
-
101,000
- interest (2)
70,974
8,080
24,240
38,654
1,150,303
192,381
586,037
371,885
(1)
Interest on bank indebtedness was calculated assuming conversion of the revolving credit facility to a one-year term facility at
the next annual facility review.
(2)
The unsecured debentures are a liability of Entropy and are non-recourse to Advantage. Interest can be paid-in-kind, or cash,
at the discretion of Entropy.
(3)
The undiscounted cash flows equal the carrying value, with the exception of performance awards, lease liability, financing
liability, convertible debentures, and unsecured debentures.
The Corporation’s bank indebtedness is governed by credit facility agreements with a syndicate of financial
institutions (note 12). The Credit Facility has a tenor of two years with a maturity date in June 2027 and is
subject to an annual review and extension by the lenders. During the revolving period, a review of the
maximum borrowing amount occurs annually on or before May and semi-annually on or before November.
There can be no assurance that the Credit Facilities will be renewed at the current borrowing base level at
that time. During the term, no principal payments are required until the revolving period matures in June
2027 in the event of a reduction, or the Credit Facility not being renewed. Management fully expects that
the facilities will be extended at each annual review.
Advantage Energy Ltd. - 93
11. Financial risk management (continued)
(c) Commodity price risk
Advantage’s derivative assets and liabilities are subject to price risk as their fair values are based on
assumptions regarding forward market prices. The Corporation enters into non-financial derivatives to
manage price risk exposure relative to actual commodity production and does not utilize derivative
instruments for speculative purposes. Changes to price assumptions can have a significant effect on the fair
value of the derivative assets and liabilities and thereby impact earnings. The estimated impact to net
income for the year ended December 31, 2025 resulting from a 10% change to significant price assumptions
is as follows:
Net Income Impact
($ millions)
Price Assumptions
+10%
(10)%
Forward AECO natural gas price
(14.3)
14.3
Forward Dawn natural gas price
(4.2)
4.2
Forward PJM electricity price
14.3
(15.6)
Forward WTI price
(1.8)
1.8
As at December 31, 2025 and March 5, 2026, the Corporation had the following commodity derivative
contracts in place:
Description of derivative
Term
Volume
Price
Natural gas - AECO
Fixed price swap
January 2026 to March 2026
142,173 Mcf/d $3.54/Mcf
Fixed price swap
April 2026 to June 2026
94,782 Mcf/d
$3.09/Mcf(1)
Fixed price swap
July 2026 to October 2026
108,999 Mcf/d
$3.01/Mcf(1)
Fixed price swap
November 2026 to March 2027
142,173 Mcf/d
$3.29/Mcf(1)
Fixed price swap
April 2027 to October 2027
75,825 Mcf/d
$2.73/Mcf(1)
Fixed price swap
November 2027 to March 2028
71,086 Mcf/d
$2.87/Mcf(1)
Fixed price swap
April 2028 to October 2028
56,869 Mcf/d
$2.73/Mcf(1)
Fixed price swap
November 2028 to March 2029
47,391 Mcf/d
$2.66/Mcf(1)
Natural gas - Dawn
Fixed price swap
January 2026 to March 2026
28,435 Mcf/d
$4.65/Mcf
Fixed price swap
April 2026 to October 2026
28,435 Mcf/d
$4.52/Mcf
Fixed price swap
November 2026 to March 2027
9,478 Mcf/d
$4.25/Mcf
Crude oil - WTI NYMEX
Fixed price swap
January 2026
2,000 bbls/d US $62.67/bbl(1)
Fixed price swap
February 2026
3,000 bbls/d US $62.33/bbl(1)
Fixed price swap
March 2026
3,500 bbls/d US $62.56/bbl(1)
Fixed price swap
April 2026 to June 2026
4,500 bbls/d US $64.17/bbl(1)
Fixed price swap
July 2026 to December 2026
4,000 bbls/d US $63.62/bbl(1)
Fixed price swap
January 2027 to December 2027
500 bbls/d US $61.16/bbl(1)
(1) Contains contracts entered into subsequent to December 31, 2025
Advantage Energy Ltd. - 94
11. Financial risk management (continued)
(c) Commodity price risk (continued)
Natural Gas - Embedded Derivatives
Advantage sells natural gas under a long-term natural gas supply agreement, delivering 25,000 MMbtu/d of
natural gas ending in 2035. Commercial terms of the agreement are based upon a spark-spread pricing
formula, providing Advantage exposure to PJM electricity prices. The price for the host contract of the initial
agreement ending in 2032 is US$2.50 per MMbtu, back-stopped with a natural gas price collar. In 2025, the
Corporation extended the term of the natural gas supply agreement by an additional 2.5 years, ending in
2035. Volumes delivered under the additional term continue to be priced using the same spark-spread
pricing formula, however, the natural gas price collar does not apply to volumes delivered during this period.
The price for the host contract of the extension agreement is US$3.73 per MMbtu. As at December 31, 2025
the fair value of the natural gas embedded derivative resulted in an asset of $45.7 million (December 31,
2024 – $82.0 million).
(d) Interest rate risk
Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest
rates. The interest charged on the outstanding bank indebtedness fluctuates with the interest rates posted
by the lenders. The Corporation is exposed to interest rate risk and may enter into fixed interest rate swaps
to mitigate interest rate risk. As at December 31, 2025, the Corporation had no outstanding interest rate
hedges in place. Had the borrowing rate been different by 100 basis points throughout the year ended
December 31, 2025, net income and comprehensive income would have changed by $3.3 million (December
31, 2024 – $2.8 million) based on the average debt balance outstanding during the year.
(e) Foreign exchange risk
Foreign exchange risk is the risk that future cash flows will fluctuate as a result of changes in the CAD/USD
exchange rate. While the majority of the Corporation’s natural gas and liquids sales are settled in Canadian
dollars, certain natural gas and oil prices where the Corporation markets its natural gas and liquids
production are denominated in US dollars. Additionally, the Corporation may enter derivative contracts to
manage the commodity risk associated with such sales and which may also settle in US dollars. The
Corporation has entered into average rate currency swaps to mitigate the Corporation’s exposure to foreign
exchange risk, which concluded in 2025. Had the CAD/USD foreign exchange rate been different by $0.02
throughout the year ended December 31, 2025, net income and comprehensive income would have
changed by $9.5 million (December 31, 2024 – $8.5 million).
Advantage Energy Ltd. - 95
11. Financial risk management (continued)
(f) Capital management
The Corporation manages its capital with the following objectives:
To ensure sufficient financial flexibility to achieve the ongoing business objectives including
replacement of production, funding of future growth opportunities, and pursuit of accretive
acquisitions; and
To maximize shareholder returns through enhancing the share value.
The Corporation monitors its capital structure and makes adjustments according to market conditions in an
effort to meet its objectives given the current outlook of the business and industry in general. The capital
structure of the Corporation is composed of working capital (cash and cash equivalents, trade and other
receivables, prepaid expenses and deposits and trade and other accrued payables), financing liabilities, bank
indebtedness, unsecured debentures, convertible debentures and share capital. The Corporation may
manage its capital structure by issuing new shares, repurchasing outstanding shares, obtaining additional
financing through bank indebtedness, refinancing current debt, issuing other financial or equity-based
instruments, declaring a dividend, adjusting capital spending, or disposing of assets. The capital structure is
reviewed by Management and the Board of Directors on an ongoing basis.
Working capital
Working capital is a capital management financial measure that provides Management and users with a
measure of the Corporation’s short-term operating liquidity. By excluding short-term derivatives
Management and users can determine if the Corporation’s operations are sufficient to cover the short-term
operating requirements. Working capital is not a standardized measure and therefore may not be
comparable with the calculation of similar measures by other entities.
A summary of working capital as at December 31, 2025 and December 31, 2024 is as follows:
December 31
2025
December 31
2024
Cash and cash equivalents
17,735
20,146
Trade and other receivables
84,973
83,188
Prepaid expenses and deposits
11,016
10,000
Trade and other accrued liabilities
(109,248)
(116,609)
Working capital surplus (deficit)
4,476
(3,275)
Advantage Energy Ltd. - 96
11. Financial risk management (continued)
(f) Capital management (continued)
Net debt
Net debt is a capital management financial measure that provides Management and users with a measure
to assess the Corporation’s liquidity. Net debt is not a standardized measure and therefore may not be
comparable with the calculation of similar measures by other entities.
A summary of the reconciliation of net debt as at December 31, 2025 and December 31, 2024 is as follows:
December 31
2025
December 31
2024
Bank indebtedness (note 12)
412,993
470,424
Convertible debentures (note 13)
143,750
143,750
Unsecured debentures (note 15)
254,421
101,000
Working capital (surplus) deficit
(4,476)
3,275
Net debt
806,688
718,449
Advantage’s capital structure as at December 31, 2025 and December 31, 2024 is as follows:
December 31
2025
December 31
2024
Shares outstanding (note 18)
166,941,610
166,931,440
Share closing market price ($/share)
11.74
9.86
Market capitalization
1,959,895
1,645,944
Net debt
806,688
718,449
Total capitalization
2,766,583
2,364,393
Advantage Energy Ltd. - 97
12. Bank indebtedness
December 31
2025
December 31
2024
Revolving credit facility
415,000
475,000
Unamortized financing fees
(2,007)
(4,576)
Balance, end of year
412,993
470,424
As at December 31, 2025, the Corporation had credit facilities with a borrowing base of $650 million. In June
2025, the Credit Facility was renewed with no changes to the borrowing base of $650 million, comprised of a $60
million extendible revolving operating loan facility from one financial institution and a $590 million extendible
revolving loan facility from a syndicate of financial institutions. The Credit Facility has a term of two years with a
maturity date in June 2027 and is subject to an annual review and extension by the lenders. During the revolving
period, a review of the maximum borrowing amount occurs annually in May and semi-annually in November.
During the term, no principal payments are required until the revolving period matures in June 2027 in the event
of a reduction, or the Credit Facilities not being renewed. The borrowing base is determined based on, among
other things, a thorough evaluation of Advantage's reserve estimates based upon the lender’s commodity price
assumptions. Revisions or changes in the reserve estimates and commodity prices can have either a positive or
a negative impact on the borrowing base. In the event that the lenders reduce the borrowing base below the
amount drawn at the time of redetermination, the Corporation has 60 days to eliminate any shortfall by repaying
amounts in excess of the new re-determined borrowing base.
The Credit Facilities permit borrowings in Canadian or U.S. dollars at variable interest rates based on the agents
Canadian Overnight Repo Rate Average ("CORRA"), Secured Overnight Financing Rate ("SOFR"), prime rate or
U.S. base rate, plus applicable pricing margins. Applicable pricing margins range from 2.5% to 6.0% for CORRA
and SOFR borrowings and 1.5% to 5.0% for prime rate and U.S. base rate borrowings, with margins determined
by the Corporation’s consolidated debt to Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") ratio.
Undrawn amounts under the Credit Facilities bear a standby fee ranging from 0.625% to 1.500% per annum,
dependent on the Corporation’s debt to EBITDA ratio. Repayments of principal are not required prior to maturity
provided that the borrowings under the Credit Facilities do not exceed the authorized borrowing base and the
Corporation is in compliance with all covenants, representations and warranties.
The Credit Facilities prohibit the Corporation from entering into any derivative contract, excluding basis swaps,
where the term of such contract exceeds five years. Further, the aggregate of such contracts cannot hedge
greater than 75% of total estimated natural gas and liquids production over the first three years and 50% over
the fourth and fifth years. In addition, the Credit Facilities allow us to enter into basis swap arrangements to any
natural gas price point in North America for up to 100,000 MMbtu/day with a maximum term of seven years.
Basis swap arrangements and the Corporation’s embedded derivative do not count against the limitations on
hedged production.
Advantage Energy Ltd. - 98
12. Bank indebtedness (continued)
The Credit Facilities contain standard commercial covenants for credit facilities of this nature. The Corporation
did not have any financial covenants at December 31, 2025 and 2024, but the Corporation is subject to various
affirmative and negative covenants under its Credit Facilities. The Corporation was in compliance with all
covenants as at December 31, 2025 and 2024. Breach of any covenant will result in an event of default in which
case the Corporation has 30 days to remedy such default. If the default is not remedied or waived, and if required
by the lenders, the administrative agent of the lenders has the option to declare all obligations under the credit
facilities to be immediately due and payable without further demand, presentation, protest, days of grace, or
notice of any kind. The Credit Facilities are collateralized by a $2 billion floating charge demand debenture
covering all assets. For the year ended December 31, 2025, the average effective interest rate on the outstanding
amounts under the facilities was approximately 5.5% (December 31, 2024 – 6.6%). The Corporation had letters
of credit of $8.4 million outstanding at December 31, 2025 (December 31, 2024 – $5.5 million).
13. Convertible debentures
Convertible
Debentures
(# of Debentures)
Liability
Component
Equity
Component
Balance, December 31, 2023
-
-
-
Issuance of convertible debentures
143,750
126,261
17,489
Issuance costs
-
(5,694)
(788)
Deferred income tax liability
-
-
(3,842)
Accretion expense
-
2,016
-
Balance at December 31, 2024
143,750
122,583
12,859
Accretion expense
-
4,000
-
Balance at December 31, 2025
143,750
126,583
12,859
The Corporation has $143.8 million aggregate principal amount of convertible unsecured subordinated
debentures (the "Debentures") at a price of $1,000 per debenture outstanding as at December 31, 2025. The
Debentures will mature and be repayable on June 30, 2029 and accrue interest at the rate of 5.0% per annum.
At the holder's option, the Debentures may be convertible into Common Shares at any time prior to the close of
business on the earlier of the business day immediately preceding (i) the maturity date, (ii) if called for
redemption, the date fixed for redemption by the Corporation, or (iii) if called for repurchase in the event of a
change of control, the payment date, at a conversion price of $14.58 per Common Share, subject to adjustment
in certain events. This represents a conversion rate of approximately 68.5871 Common Shares for each $1,000
principal amount of the Debentures, subject to the operation of certain antidilution provisions. In the event of a
change of control of the Corporation, subject to certain terms and conditions, holders of the Debentures will be
entitled to convert their Debentures and, subject to certain limitations, receive, in addition to the number of
Common Shares they would otherwise be entitled to receive, an additional number of Common Shares
per $1,000 principal amount of the Debentures.
Advantage Energy Ltd. - 99
13. Convertible debentures (continued)
The Debentures may not be redeemed by the Corporation prior to June 30, 2027, except in certain limited
circumstances following a change of control. On or after June 30, 2027 and prior to June 30, 2028, the
Debentures may be redeemed by the Corporation, in whole or in part, from time to time, on not more than 60
days and not less than 30 days prior notice at a redemption price equal to their principal amount plus accrued
and unpaid interest, if any, up to but excluding the date set for redemption, provided that the current market
price of the Common Shares on the Toronto Stock Exchange (the "TSX") is not less than 130% of the Conversion
Price. If the Debentures are redeemed by the Corporation prior to June 30, 2028, a holder of Debentures who
elects to convert such Debentures into Common Shares during the period from, and including, the date on which
the Corporation sends notice of such redemption to, and including, the last business day immediately preceding
the date of redemption will, subject to TSX approval, be entitled to receive additional Common Shares on such
conversion as a make-whole premium. On or after June 30, 2028 and prior to the final maturity date, the
Debentures may be redeemed by Advantage, in whole or in part from time to time, on not more than 60 days'
and not less than 30 days' prior written notice, at a redemption price equal to the principal amount thereof plus
accrued and unpaid interest thereon.
The fair value of the Debentures at December 31, 2025 was $160.6 million (December 31, 2024 - $147.3 million)
using quoted market prices on the TSX.
14. Financing liability
The Corporation has a take-or-pay volume commitment with a 12.5% working interest partner in the
Corporation’s Glacier Gas Plant, with a term due to expire in 2035. The volume commitment agreement is treated
as a financing transaction with an effective interest rate of 9.1%.
A reconciliation of the financing liability is provided below:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
88,083
92,897
Interest expense
7,795
8,272
Financing payments
(13,050)
(13,086)
Balance, end of year
82,828
88,083
Current financing liability
5,754
5,256
Non-current financing liability
77,074
82,827
Advantage Energy Ltd. - 100
15. Unsecured debentures
a) Unsecured debentures - convertible
The Corporation’s subsidiary, Entropy, is a party to two Investment Agreements with investors who provided
capital commitments of $300 million and $200 million. In connection with the Investment Agreements,
Entropy will issue unsecured debentures to fund carbon capture and storage projects that reach final
investment decision as certain predetermined return thresholds are met.
Under the terms of the agreements, Entropy and the investors have options that provide for the unsecured
debentures to be exchanged for commons shares at an exchange price of $10.00 per share and $12.75 per
share, respectively, subject to adjustment in certain circumstances. The investors have the option to
exchange the outstanding unsecured debentures for common shares at any time while Entropy may
commence a mandatory exchange of unsecured debentures for common shares in advance of an IPO. The
unsecured debentures have a term of 10 years, if not exchanged for common shares, which are to be repaid
at the end of the term in the amount greater of the principal amount and the investor’s pro rata share of
the fair market value of Entropy. Each debenture issued by Entropy bears an interest rate of 8% per annum
that Entropy can elect to pay in cash or pay-in-kind, due on a quarterly basis. Any paid-in-kind interest is
added to the aggregate principal, subject to certain limitations. The unsecured debentures are non-recourse
to Advantage.
During 2025, Entropy issued unsecured debentures for gross proceeds of $135.0 million (December 31, 2024
- $55.0 million) and incurred $6.5 million of issuance costs (December 31, 2024 - $3.5 million). Subsequent
to December 31, 2025, Entropy issued unsecured debentures for gross proceeds of $50.0 million.
The exchange features of the unsecured debentures meet the definition of a derivative liability, as the
exchange features allow the unsecured debentures to be potentially exchanged for a variable amount of
common shares in certain situations, and as such does not meet the fixed-for-fixed criteria for equity
classification. The unsecured debenture - derivative liability is classified as Level 3 within the fair value
hierarchy.
The following table provides a summary of the outstanding aggregate principal balance of unsecured
debentures:
Year ended
December 31, 2025
Year ended
December 31, 2024
Aggregate principal balance, beginning of the year
101,000
40,807
Unsecured debentures issued
135,000
55,000
Interest paid-in-kind
14,334
5,193
Aggregate principal balance, end of year
250,334
101,000
The following tables disclose the components associated with the unsecured debentures at initial
recognition. The changes in the unsecured debentures are as follows:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
64,682
27,819
Issuances
97,659
39,159
Issuance costs
(6,450)
(3,528)
Accretion expense
3,389
1,232
Balance, end of year
159,280
64,682
Advantage Energy Ltd. - 101
15. Unsecured debentures (continued)
a) Unsecured debentures - convertible (continued)
The changes in the unsecured debentures - derivative liability related to the exchange features are as
follows:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
40,344
18,444
Initial recognition
51,675
21,034
Revaluation
(335)
866
Balance, end of year
91,684
40,344
The Corporation determined the value of the conversion feature using a probability weighted Black-Scholes
calculation. Unobservable inputs used to determine the valuation at December 31, 2025 includes estimated
share price, estimated timing and probability of an IPO, share price volatility and credit spread. The below
table provides the impact to the valuation of the derivative liability by adjusting the inputs below:
$ millions
Increase
(Decrease)
$1 change in estimated share price
21.7
(21.7)
1% change in credit spread
5.4
(5.6)
1 year change in estimated timing of an IPO
9.9
(9.3)
b) Unsecured debentures - non-convertible
In 2025, Entropy entered into non-convertible unsecured debenture financing arrangements for aggregate
principal availability of up to $10.0 million. The unsecured debentures bear interest at 15% per annum and
provide for a payment-in-kind feature under which interest may be capitalized to the principal balance, to
a maximum of 30%. The debentures have a term of five years from the date of issuance and include
provisions permitting early repayment. During 2025, Entropy issued non-convertible unsecured debentures
for gross proceeds of $4.0 million (December 31, 2024 - nil).
The following table provides a summary of the outstanding aggregate principal balance of the Corporation’s
non-convertible unsecured debentures:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
-
-
Non-convertible unsecured debentures issued
4,000
-
Interest paid-in-kind
87
-
Balance, end of year
4,087
-
Advantage Energy Ltd. - 102
16. Provisions and other liabilities
Year ended
December 31, 2025
Year ended
December 31, 2024
Performance Awards (note 20(c))
3,210
2,312
Deferred Share Units (note 20(d))
5,175
4,869
Deferred revenue (a)
4,787
5,639
Lease liability (b)
2,907
2,820
Decommissioning liability (c)
100,504
126,753
Balance, end of year
116,583
142,393
Current provisions and other liabilities
12,767
14,724
Non-current provisions and other liabilities
103,816
127,669
(a) Deferred revenue
Deferred revenue represents an advance payment received by Advantage in consideration for the future
sales of natural gas. Deferred revenue is recognized over the course of the term of the agreements (note 11
(c)).
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
5,639
6,603
Additions
-
240
Recognized in natural gas and liquids sales
(852)
(1,204)
Balance, end of year
4,787
5,639
Current deferred revenue
660
852
Non-current deferred revenue
4,127
4,787
(b) Lease liability
The Corporation incurs lease payments related to office space and other miscellaneous equipment. The
Corporation has recognized a lease liability in relation to all lease arrangements measured at the present
value of the remaining lease payments.
A reconciliation of the lease liability is provided below:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
2,820
1,967
Additions
1,163
1,366
Leases acquired
-
272
Interest expense
172
160
Lease payments
(1,248)
(945)
Balance, end of year
2,907
2,820
Current lease liability
1,325
929
Non-current lease liability
1,582
1,891
Advantage Energy Ltd. - 103
16. Provisions and other liabilities (continued)
(c) Decommissioning liability
The Corporation’s decommissioning liability results from net ownership interests in natural gas and liquids
assets including well sites, gathering systems and facilities, all of which will require future costs of
decommissioning under environmental legislation. These costs are expected to be incurred between 2026
and 2075. A risk-free rate of 3.85% (December 31, 2024 - 3.30%) and an inflation factor of 2.0% (December
31, 2024 - 2.0%) were used to calculate the fair value of the decommissioning liability at December 31, 2025.
As at December 31, 2025, the total estimated undiscounted, uninflated cash flows required to settle the
Corporation’s decommissioning liability was $163.4 million (December 31, 2024 – $168.7 million).
A reconciliation of the decommissioning liability is provided below:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
126,753
62,155
Accretion expense
1,460
2,141
Liabilities incurred
1,999
12,229
Liabilities acquired
-
28,269
Revaluation of liabilities acquired
-
24,694
Liabilities disposed
(2,339)
(1,990)
Change in estimates
(9,235)
4,647
Effect of change in risk-free rate
(13,082)
(2,333)
Liabilities settled
(5,052)
(3,059)
Balance, end of year
100,504
126,753
Current decommissioning liability
4,000
7,000
Non-current decommissioning liability
96,504
119,753
Advantage Energy Ltd. - 104
17. Income taxes
The provision for income taxes is as follows:
Year ended
December 31, 2025
Year ended
December 31, 2024
Current income tax expense
-
-
Deferred income tax expense
24,713
12,805
Income tax expense
24,713
12,805
The provision for income taxes varies from the amount that would be computed by applying the combined
federal and provincial income tax rates for the following reasons:
Year ended
December 31, 2025
Year ended
December 31, 2024
Income before taxes and non-controlling interest
75,715
32,917
Combined federal and provincial income tax rates
23.0%
23.0%
Expected income tax expense
17,414
7,571
Increase (decrease) in income taxes resulting from:
Non-deductible expenses
1,909
895
Valuation allowance
4,246
4,678
Other
1,144
(340)
Income tax expense
24,713
12,805
Effective tax rate
32.6%
38.9%
The movement in deferred income tax assets and liabilities without taking into consideration the offsetting of
balances within the same tax jurisdiction is as follows:
At
December 31
2024
Credited
(charged)
to income
Credited
(charged)
to equity
At
December 31
2025
Deferred income tax assets:
Decommissioning liability
29,153
(6,037)
-
23,116
Non-capital losses
84,037
(19,731)
-
64,306
Financing liability
20,259
(1,131)
-
19,128
Other
21,097
163
21,260
154,546
(26,736)
-
127,810
Deferred income tax liabilities:
Property, plant and equipment
(377,343)
(7,575)
-
(384,918)
Derivative asset/liability
(26,557)
9,816
-
(16,741)
Other
(3,812)
(218)
-
(4,030)
(407,712)
2,023
-
(405,689)
Deferred income tax liability
(253,166)
(24,713)
-
(277,879)
Advantage Energy Ltd. - 105
17. Income taxes (continued)
At
December 31
2023
Credited
(charged)
to income
Credited
(charged)
to equity
At
December 31
2024
Deferred income tax assets:
Decommissioning liability
14,293
14,860
-
29,153
Non-capital losses
74,639
9,398
-
84,037
Financing liability
20,791
(532)
-
20,259
Other
21,175
(616)
538
21,097
130,898
23,110
538
154,546
Deferred income tax liabilities:
Property, plant and equipment
(342,176)
(35,167)
-
(377,343)
Derivative asset/liability
(25,365)
(1,192)
-
(26,557)
Other
(414)
444
(3,842)
(3,812)
(367,955)
(35,915)
(3,842)
(407,712)
Deferred income tax liability
(237,057)
(12,805)
(3,304)
(253,166)
The estimated tax pools available at December 31, 2025 are as follows:
Canadian development expenses
304,978
Canadian exploration expenses
76,350
Canadian oil and gas property expenses
280,196
Non-capital losses
309,493
Undepreciated capital cost
528,578
Capital losses
135,369
Scientific research and experimental development expenditures
32,506
Other
29,622
1,697,091
The non-capital loss carry forward balances expire no earlier than 2029.
No deferred tax asset has been recognized for capital losses of $135 million (December 31, 2024 – $135 million).
Recognition is dependent on the realization of future taxable capital gains.
Advantage Energy Ltd. - 106
18. Share capital
(a) Authorized
The Corporation is authorized to issue an unlimited number of shares without nominal or par value.
Common Shares
(# of shares)
Share capital
($000)
Balance at December 31, 2023
162,225,180
1,952,241
Issuance of common shares
5,910,000
62,643
Shares issued on Performance Share Unit settlements (note 20 (a))
1,251,060
-
Contributed surplus transferred on Performance Share Unit settlements
-
3,891
Shares purchased and cancelled under NCIB
(2,454,800)
(29,536)
Balance at December 31, 2024
166,931,440
1,989,239
Shares issued on Performance Share Unit settlements (note 20 (a))
671,870
-
Contributed surplus transferred on Performance Share Unit settlements
-
6,308
Shares purchased and cancelled under NCIB
(661,700)
(7,882)
Balance at December 31, 2025
166,941,610
1,987,665
(b) Issued
For the year ended December 31, 2025, the Corporation issued 0.7 million common shares in connection with
the Restricted and Performance Award Incentive Plan (note 20(a)).
In 2024, the Corporation issued 5.9 million common shares at $11.00 per share for gross proceeds of $65.0
million. The Corporation incurred issuance costs of $2.4 million, net of deferred taxes, which was charged to
share capital.
(c) Normal Course Issuer Bid ("NCIB")
On May 8, 2025, the TSX approved the renewal of the NCIB. The NCIB commenced on May 14, 2025 and will
terminate on May 13, 2026. Pursuant to the NCIB, Advantage was approved to purchase for cancellation,
from time to time, as it considered advisable, up to a maximum of 14,415,014 common shares of the
Corporation.
Purchases pursuant to the NCIB are made on the open market through the facilities of the TSX or alternative
trading systems. The price that Advantage paid for its common shares under the NCIB was the prevailing
market price on the TSX at the time of such purchase, including commissions. All common shares acquired
under the NCIB were cancelled.
For the year ended December 31, 2025, the Corporation purchased 0.7 million common shares for
cancellation for a total of $6.7 million. Share capital was reduced by $7.9 million while contributed surplus
was increased by $1.2 million, representing the excess average carrying value of the common shares over the
purchase price.
Advantage Energy Ltd. - 107
19. Non-controlling interest ("NCI")
A reconciliation of the NCI, representing the carrying value of the 8% shareholding of Entropy (note 5) held by
third-parties is provided below:
Year ended
December 31
2025
2024
Balance, beginning of the year
(1,506)
101
Net loss and comprehensive loss attributable to NCI
(2,049)
(1,607)
Balance, end of year
(3,555)
(1,506)
20. Long-term compensation plans
(a) Restricted and Performance Award Incentive Plan – Performance Share Units
Under the Restricted and Performance Award Incentive Plan, service providers can be granted two types of
equity incentive awards: Restricted Share Units and Performance Share Units. As at December 31, 2025, no
equity Restricted Share Units have been granted. Performance Share Units vest over three years from the
grant date and are subject to a Payout Multiplier that is determined based on the achievement of corporate
performance measures during that three-year period, as approved by the Board of Directors.
The following table is a continuity of Performance Share Units:
Performance Share Units
Balance at December 31, 2023
2,819,414
Granted
882,858
Settled
(1,191,708)
Forfeited
(178,864)
Balance at December 31, 2024
2,331,700
Granted
1,233,959
Settled
(621,668)
Forfeited
(6,500)
Balance at December 31, 2025
2,937,491
During 2025, 0.6 million Performance Share Units vested and were settled with the issuance of 0.7 million
common shares (note 18).
(b) Share-based compensation expense
Share-based compensation expense for the years ended December 31, 2025 and 2024 are as follows:
Year ended
December 31
2025
2024
Total share-based compensation
9,975
4,950
Capitalized (note 10)
(1,764)
(1,058)
Share-based compensation expense
8,211
3,892
Advantage Energy Ltd. - 108
20. Long-term compensation plans (continued)
(c) Performance Award Incentive Plan - Performance Awards
Under the Performance Award Incentive Plan, service providers can be granted cash Performance Awards.
Such grants vest over three years from the grant date and are subject to a Payout Multiplier that is
determined based on the achievement of corporate performance measures during that three-year period,
as approved by the Board of Directors. Performance Awards are expensed to general and administrative
expense with the recording of a current and non-current liability (note 16) until eventually settled in cash.
The following table is a continuity of the Corporation’s liability related to outstanding Performance Awards:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
2,312
6,687
Performance Award expense
1,723
543
Interest expense
78
61
Performance Awards settled
(903)
(4,979)
Balance, end of year
3,210
2,312
Current
1,607
1,074
Non-current
1,603
1,238
(d) Deferred Share Units ("DSU")
Deferred Share Units are issued to Directors of the Corporation. Each DSU entitles participants to receive
cash equal to the Corporation’s common shares, multiplied by the number of DSUs held. All DSU’s vest
immediately upon grant and become payable within two calendar years following the Director’s retirement
from the Board.
The following table is a continuity of Deferred Share Units:
Deferred Share Units
Balance at December 31, 2023
536,680
Granted
69,653
Settled
(112,498)
Balance at December 31, 2024
493,835
Granted
99,358
Settled
(152,434)
Balance at December 31, 2025
440,759
Advantage Energy Ltd. - 109
20. Long-term compensation plans (continued)
(d) Deferred Share Units (continued)
The expense related to Deferred Share Units is calculated using the fair value method based on the
Corporation’s share price at the end of each reporting period and is charged to general and administrative
expense. The following table is a continuity of the Corporation’s liability related to outstanding Deferred
Share Units:
Year ended
December 31, 2025
Year ended
December 31, 2024
Balance, beginning of the year
4,869
4,579
Granted
1,085
672
Revaluation of outstanding Deferred Share Units
981
576
Settled
(1,760)
(958)
Balance, end of year
5,175
4,869
21. Net income per share attributable to Advantage shareholders
The calculations of basic and diluted net income per share are derived from both net income attributable to
Advantage shareholders and weighted average shares outstanding, calculated as follows:
Year ended
December 31
2025
2024
Net income attributable to Advantage shareholders
Basic and diluted
53,051
21,719
Weighted average shares outstanding
Basic
166,977,807
163,954,619
Performance Share Units
3,202,198
2,866,217
Diluted
170,180,005
166,820,836
Net income per share attributable to Advantage shareholders
Basic ($/share)
0.32
0.13
Diluted ($/share)
0.31
0.13
In computing diluted per share amounts at December 31, 2025, the common shares potentially issuable on the
conversion of the convertible debentures (note 13) were excluded as they were determined to be anti-dilutive.
In computing diluted per share amounts at December 31, 2025, the Entropy common shares potentially issuable
on the conversion of the unsecured debentures were excluded as they were determined to be anti-dilutive. If
the aggregate principal balance of unsecured debentures were converted at December 31, 2025, Advantage's
ownership in Entropy would have been 50% (December 31, 2024 – 68%).
Advantage Energy Ltd. - 110
22. Revenues
(a) Natural gas and liquids sales
Advantage’s revenue is comprised of natural gas, crude oil, condensate and NGLs sales to multiple
customers. For the years ended December 31, 2025 and 2024, natural gas and liquids sales were as follows:
Year ended
December 31
2025
2024
Crude oil
246,880
186,896
Condensate
27,604
39,723
NGLs
62,663
65,289
Liquids
337,147
291,908
Natural Gas
361,837
251,387
Natural gas and liquids sales
698,984
543,295
At December 31, 2025, receivables from contracts with customers, which are included in trade and other
receivables, were $70.8 million (December 31, 2024 - $63.2 million).
Advantage markets its natural gas and liquids production to major North American marketers, three of
which each account for greater than 10% of natural gas and liquids sales. These customers account for 29%,
29%, and 16%, respectively, of the Corporation’s total natural gas and liquids sales.
(b) Sales of purchased natural gas
Year ended
December 31
2025
2024
Sales of purchased natural gas
1,121
-
Natural gas purchases
556
-
Net sales of purchased natural gas
1,677
-
(c) Processing and other income
Year ended
December 31
2025
2024
Processing income
3,114
5,467
Other
2,720
1,340
Total processing and other income
5,834
6,807
Advantage Energy Ltd. - 111
23. General and administrative expense
Year ended
December 31
2025
2024
Personnel
35,822
31,027
Revaluation of outstanding Deferred Share Units (note 20(d))
981
576
Professional fees
2,976
1,895
Information technology cost
4,053
3,023
Office rent and administration cost
3,444
3,837
Total general and administrative
47,276
40,358
Capitalized (note 10)
(6,925)
(7,274)
General and administrative expense
40,351
33,084
24. Finance expense - net
Year ended
December 31
2025
2024
Interest on bank indebtedness (note 12)
33,130
32,329
Interest income
(1,286)
(1,198)
Interest on financing liability (note 14)
7,795
8,272
Interest on provisions and other liabilities (note 16(b), 20(c))
250
221
Interest paid-in-kind on unsecured debentures (note 15)
14,421
5,193
Interest on convertible debentures (note 13)
7,188
3,860
Accretion on convertible debentures (note 13)
4,000
2,016
Accretion on decommissioning liability (note 16(c))
1,460
2,141
Accretion on unsecured debentures (note 15)
3,389
1,232
Capitalized interest paid-in-kind (note 10)
(9,286)
(1,646)
Total finance expense - net
61,061
52,420
25. Related party transactions
(a) Key management compensation
The compensation paid or payable to officers and directors is as follows:
Year ended
December 31
2025
2024
Salaries, director fees and short-term benefits
7,647
8,428
Share-based compensation and Performance Awards (1)
4,413
3,481
12,060
11,909
(1)
Represents that total share-based compensation expense, before capitalization, for key management personnel.
As at December 31, 2025, there is a commitment of $28.9 million (December 31, 2024 – $8.5 million) related
to change of control or termination of employment of officers.
Advantage Energy Ltd. - 112
26. Supplementary cash flow information
(a) Changes in non-cash working capital
Year ended
December 31
2025
2024
Source (use) of cash:
Trade and other receivables
(1,785)
(29,810)
Prepaid expense and deposits
(1,016)
6,618
Trade and other accrued liabilities
(7,361)
46,003
Inventory
45
620
Deferred revenue
(852)
(964)
Performance Awards
898
(4,375)
Deferred Share Units
306
290
(9,765)
18,382
Related to operating activities
(6,697)
(20,804)
Related to investing activities
(3,068)
39,186
(9,765)
18,382
Advantage Energy Ltd. - 113
26. Supplementary cash flow information (continued)
(b) Reconciliation of liabilities
The following table provides a reconciliation of liabilities to cash flows arising from financing activities:
Bank
Indebtedness
(Note 12)
Lease
Liability
Note 16 (b)
Convertible
Debentures
(note 13)
Unsecured
Debentures
Note 15 (a)
Financing
Liability
(Note 14)
Balance at December 31, 2023
212,854
1,967
-
27,819
92,897
Changes from financing cash flows:
-
-
-
-
-
Draws on credit facilities
735,000
-
-
-
-
Repayments on credit facilities
(475,000)
-
-
-
-
Financing fees
(15,128)
-
-
-
-
Issuances
-
-
143,750
55,000
-
Issuance costs
-
-
(6,482)
(3,528)
-
Principal repayments
-
(945)
-
-
(13,086)
Non-cash changes:
-
-
-
-
-
Accretion expense
-
-
2,016
1,232
-
Interest expense
-
160
-
-
8,272
Interest paid-in-kind
-
-
-
5,193
-
Lease additions
-
1,638
-
-
-
Amortization of finance fees
12,698
-
-
-
-
Allocated to equity component
-
-
(16,701)
-
-
Allocated to derivative liability
-
-
-
(21,034)
-
Balance at December 31, 2024
470,424
2,820
122,583
64,682
88,083
Changes from financing cash flows:
-
-
-
-
-
Draws on credit facilities
95,000
-
-
-
-
Repayments on credit facilities
(155,000)
-
-
-
-
Financing fees
(1,583)
-
-
-
-
Issuances
-
-
-
139,000
-
Issuance costs
-
-
-
(6,450)
-
Principal repayments
-
(1,248)
-
-
(13,050)
Non-cash changes:
-
-
-
-
-
Accretion expense
-
-
4,000
3,389
-
Interest expense
-
172
-
-
7,795
Interest paid-in-kind
-
-
-
14,421
-
Lease additions
-
1,163
-
-
-
Amortization of finance fees
4,152
-
-
-
-
Allocated to derivative liability
-
-
-
(51,675)
-
Balance at December 31, 2025
412,993
2,907
126,583
163,367
82,828
Advantage Energy Ltd. - 114
27. Commitments and contingencies
(a) Commitments
At December 31, 2025 Advantage had commitments relating to building operating costs of $1.4 million,
processing commitments of $130.5 million and transportation commitments of $950.4 million. The
estimated remaining payments are as follows:
Payments due by period
($ millions)
Total
2026
2027
2028
2029
2030
Beyond
Building operating cost (1)
1.4
0.8
0.6
-
-
-
-
Processing
130.5
22.4
20.3
18.8
16.2
10.9
41.9
Transportation
950.4
103.8
101.2
94.9
86.0
83.2
481.3
Total commitments
1,082.3
127.0
122.1
113.7
102.2
94.1
523.2
(1) Excludes fixed lease payments which are included in the Corporation’s lease liability.
(b) Contingencies
In 2025, Entropy purchased an interest in three carbon hubs for $29.8 million which includes contingent
consideration of up to $15 million based on commercial milestones achieved by various projects. As the
likelihood and timing of these milestones remain uncertain, no liability has been recognized for the
contingent consideration at December 31, 2025.
28. Subsequent events
a) Subsequent to December 31, 2025, the Corporation closed an asset exchange agreement with a third party
whereby it disposed of an interest in non-core infrastructure in exchange for a pipeline asset and cash
consideration of $12.0 million.
b) Subsequent to December 31, 2025, Entropy issued unsecured debentures for gross proceeds of $50.0
million.
Advantage Energy Ltd. - 115
Advantage Energy Ltd.
Supplemental Financial Information (unaudited)
Exhibit to the December 31, 2025 Consolidated Financial Statements
The following ratio has been calculated on a consolidated basis for the twelve-month period ended December 31,
2025. This ratio is based on Advantage Energy Ltd.’s Consolidated Financial Statements that are prepared in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board.
Twelve months ended
December 31, 2025
Earnings Coverage Ratio(1)
2.0x
(1) Calculated as net income (loss) and comprehensive income (loss) attributed to Advantage shareholders, before finance expense and
income tax expense divided by finance expense (including capitalized interest).
Advantage Energy Ltd. - 116
ADVISORY
Forward-Looking Information and Other Advisories
This document contains certain forward-looking statements and forward-looking information (collectively,
"forward-looking statements"), which are based on our current internal expectations, estimates, projections,
assumptions and beliefs. These forward-looking statements relate to future events or our future performance. All
statements other than statements of historical fact may be forward-looking statements. Forward-looking
statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue",
"estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might",
"should", "believe", "would" and similar or related expressions. These statements are not guarantees of future
performance.
In particular, forward-looking statements in this document include, but are not limited to, statements about our
strategy, plans, objectives, priorities and focus and the benefits to be derived therefrom; the focus of the
Corporation's 2026 capital program; that Advantage has the foundation for several important milestones in 2026;
the expected timing of Advantage's gas plant at Progress and the anticipated benefits thereof, including the
expected increase to corporate production; Advantage's long-term strategy of minimizing exposure to AECO
volatility; Advantage's hedging program and its hedges going forward including the proportion of expected
production hedged; the anticipated terms of Advantage's Ventura market and Dawn market contracts and the
anticipated benefits thereof; that Advantage expects to continue to allocate substantially all FCF towards debt
reduction until it achieves its net debt target; Advantage's net debt target range, the anticipated timing of reaching
such target, and that once Advantage reaches its net debt target it expects to balance further debt reduction with
opportunistic share buybacks; Advantage's 2026 drilling program, including its anticipated production growth and
capital efficiencies; that year-to-date production is ahead of budget; Advantage's expectations regarding the timing
of the turnaround of the Glacier gas plant and the anticipated benefits thereof; that operating costs per boe is
expected to fall as production is expected to be increasingly processed through owned and operated gas plant
capacity; that corporate production is expected to remain stable through the end of 2027; that development
programs beyond 2027 are expected to remain efficient; that Advantage will only consider material investments in
new infrastructure if supported by future supply and demand fundamentals; the anticipated completion of Entropy's
Glacier facility and the anticipated benefits thereof; Advantage's disciplined financial strategy, supported by strong
free cash flow generation and selective non-core asset dispositions; the Corporation's 2026 capital guidance
including its anticipated cash used in investing activities, total average production, liquids production (% of total
average production), royalty rate, operating expense per boe, transportation expense per boe and G&A/finance
expense per boe; the anticipated costs of the Glacier Phase 2 capture equipment, compression, transportation and
storage wells and the installation of the modular power plant providing power and heat for the Glacier Gas Plant
and Entropy's CCS equipment; the Corporation's anticipated total annual production in 2026; the Corporation's
forecasted 2026 natural gas market exposure including the anticipated effective production rate; the Corporation's
commodity risk management program and financial risk management program and the anticipated benefits to be
derived therefrom; the terms of the Corporation's derivative contracts, including their purposes, the timing of
settlement of such contracts and the anticipated benefits to be derived therefrom; the Corporation's estimated tax
pools and its expectations that it will not be subject to cash taxes until calendar 2028; that Advantage's Valhalla
assets continue to demonstrate resilience in a volatile commodities environment; the Corporation's commitments
and contractual obligations and the anticipated payments in connection therewith and the anticipated timing
thereof; Advantage's ability to actively manage its portfolio in conjunction with its future development plans and its
ability to ensure that the Corporation is properly diversified into multiple markets; that the Corporation will monitor
its capital structure and make adjustments according to market conditions; the Corporation's strategy for managing
its capital structure, including by issuing new common shares, repurchasing outstanding common shares, obtaining
Advantage Energy Ltd. - 117
additional financing through bank indebtedness, refinancing current debt, issuing other financial or equity-based
instruments, declaring a dividend or adjusting capital spending; the terms of the Corporation's Credit Facility,
including the timing of the next review of the Credit Facility and the Corporation's expectations regarding the
extension of the Credit Facility at each annual review; the Corporation's ability to satisfy all liabilities and
commitments and meet future obligations as they become due and the means for satisfying such future obligations;
the terms of Entropy's unsecured debentures; the anticipated undiscounted, uninflated cash flows required to settle
the Corporation's decommissioning liability and the anticipated timing that such costs will be incurred; Entropy's
business plan and the anticipated benefits to be derived therefrom; statements related to reserves; the statements
under "critical accounting estimates" in the MD&A; and other matters.
These forward-looking statements involve substantial known and unknown risks and uncertainties, many of which
are beyond our control, including, but not limited to: the risk that (i) the tariffs that are currently in effect on goods
exported from or imported into Canada continue in effect for an extended period of time, the tariffs that have been
threatened are implemented, that tariffs that are currently suspended are reactivated, the rate or scope of tariffs
are increased, or new tariffs are imposed, including on oil and natural gas, (ii) the U.S. and/or Canada imposes any
other form of tax, restriction or prohibition on the import or export of products from one country to the other,
including on oil and natural gas, and (iii) the tariffs imposed or threatened to be imposed by the U.S. on other
countries and retaliatory tariffs imposed or threatened to be imposed by other countries on the U.S., will trigger a
broader global trade war which could have a material adverse effect on the Canadian, U.S. and global economies,
and by extension the Canadian oil and natural gas industry and the Corporation, including by decreasing demand
for (and the price of) oil and natural gas, disrupting supply chains, increasing costs, causing volatility in global
financial markets, and limiting access to financing; the impact of significant declines in market prices for oil and
natural gas; stock market volatility; changes to legislation and regulations and how they are interpreted and
enforced; our ability to comply with current and future environmental or other laws; actions by governmental or
regulatory authorities including increasing taxes, regulatory approvals, changes in investment or other regulations;
changes in tax laws, royalty regimes and incentive programs relating to the oil and gas industry; the risk that wars
and other armed conflicts adversely affect world economies and the demand for oil and natural gas, including the
ongoing war between Russian and Ukraine and/or hostilities in the Middle East and Venezuela; the effect of
acquisitions; our success at acquisition, exploitation and development of reserves; unexpected drilling results;
failure to achieve production targets on timelines anticipated or at all; changes in commodity prices, currency
exchange rates, capital expenditures, reserves or reserves estimates and debt service requirements; the occurrence
of unexpected events involved in the exploration for, and the operation and development of, oil and gas properties;
hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to
wells, production facilities, other property and the environment or in personal injury; changes or fluctuations in
production levels; individual well productivity; delays in anticipated timing of drilling and completion of wells; delays
in timing of facility installation; risk on the financial capacity of the Corporation's contract counterparties and
potentially their ability to perform contractual obligations; delays in obtaining stakeholder and regulatory approvals;
performance or achievement could differ materially from those expressed in, or implied by, the forward-looking
information; the risk that the Credit Facility may not be renewed at each annual review; competition from other
producers; the risk that the Corporation may not minimize its exposure to AECO volatility; the risk that the
Corporation's actual 2026 financial and operating results may not be consistent with its 2026 guidance; the risk that
the Corporation may not achieve its net debt target in 2026, or at all; the risk that the Corporation's 2026 annual
average production may be less than anticipated; the risk that the Corporation may not have sufficient financial
resources to acquire its common shares pursuant to an NCIB in the future; the lack of availability of qualified
personnel or management; ability to access sufficient capital from internal and external sources; credit risk; that
Entropy's existing planned capital projects may not result in completed CCS projects; the price of and market for
carbon credits and offsets; current and future carbon prices and royalty regimes; the risk that the Corporation's
Advantage Energy Ltd. - 118
commodity risk management program and financial risk management program may not achieve the results
anticipated; the risk that the Corporation may be subject to cash taxes prior to calendar 2028; the risk that the costs
of the Glacier Phase 2 capture equipment, compression, transportation and storage wells and the installation of the
modular power plant providing power and heat for the Glacier Gas Plant and Entropy's CCS equipment may be
greater than anticipated; the risk that the construction of the Corporation's gas plant at Progress may not resume
when anticipated, or at all, and that it may have a greater impact on production than anticipated; the risk that the
Corporation's Valhalla assets may not continue to demonstrate resilience in a volatile commodities environment;
the risk that Advantage may not actively manage its portfolio in conjunction with its future development plans or
ensure that the Corporation is properly diversified into multiple markets; the risk that the Corporation may not
allocate substantially all of its free cash flow towards debt reduction until it reaches its target range, or that the
Corporation may not reach its net debt target range on the anticipated timeline or at all; the risk that the
Corporation may not balance further debt reduction with opportunistic share buybacks; the risk that the completion
of the Progress gas plant and the turnaround at the Glacier gas plant will not result in the benefits anticipated; the
risk that operating costs per boe will not fall as anticipated; the risk that development programs beyond 2027 may
not remain efficient; the risk that Entropy's Glacier CCS Phase 2 project may not be completed on the timeline
anticipated or at all, or that it may not result in the anticipated benefits; the risk that the Corporation may not satisfy
all of its liabilities and commitments and meet its future obligations as they become due; the risk that the
undiscounted, uninflated cash flows required to settle the Corporation's decommissioning liability may be greater
than anticipated; the risk that Entropy's future projects may have a greater capital cost than anticipated; and the
risks and uncertainties described in the Corporation’s Annual Information Form which is available at
www.sedarplus.ca and www.advantageog.com. Readers are also referred to risk factors described in other
documents Advantage files with Canadian securities authorities.
With respect to forward-looking statements contained in this document, in addition to other assumptions identified
herein, Advantage has made assumptions regarding, but not limited to: the duration and impact of tariffs that are
currently in effect on goods exported from or imported into Canada, and that other than the tariffs that are currently
in effect, neither the U.S. nor Canada (i) increases the rate or scope of such tariffs, reenacts tariffs that are currently
suspended, or imposes new tariffs, on the import of goods from one country to the other, including on oil and
natural gas, and/or (ii) imposes any other form of tax, restriction or prohibition on the import or export of products
from one country to the other, including on oil and natural gas; that the current commodity price and foreign
exchange environment will continue or improve; conditions in general economic and financial markets; effects of
regulation by governmental agencies; receipt of required stakeholder and regulatory approvals; royalty regimes;
future exchange rates; royalty rates; future operating costs; availability of skilled labour; availability of drilling and
related equipment; timing and amount of capital expenditures; the ability to efficiently integrate assets acquired
through acquisitions; the impact of increasing competition; the price of crude oil and natural gas; that the
Corporation will have sufficient cash flow, debt or equity sources or other financial resources required to fund its
capital and operating expenditures and requirements as needed; that Entropy's planned capital projects will lead to
completed CCS projects; that the Corporation’s conduct and results of operations will be consistent with its
expectations; that the Corporation will have the ability to develop its crude oil and natural gas properties in the
manner currently contemplated; availability of pipeline capacity; that current or, where applicable, proposed
assumed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; that
the Corporation will have sufficient financial resources to purchase its shares under NCIBs in the future; and that
the estimates of the Corporation’s production, reserves and resources volumes and the assumptions related thereto
(including commodity prices and development costs) are accurate in all material respects and that such reserves
exist in the quantities predicted or estimated and can be profitably produce in the future.
Advantage Energy Ltd. - 119
Management has included the above summary of assumptions and risks related to forward-looking information
provided in this document in order to provide shareholders with a more complete perspective on Advantage's future
operations and such information may not be appropriate for other purposes. Advantage’s actual results,
performance or achievement could differ materially from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what benefits that Advantage will derive there from.
Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are
made as of the date of this document and Advantage disclaims any intent or obligation to update publicly any
forward-looking statements, whether as a result of new information, future events or results or otherwise, other
than as required by applicable securities laws.
The future acquisition by the Corporation of the Corporation's common shares pursuant to its share buyback
program (including through an NCIB), if any, and the level thereof is uncertain. Any decision to acquire common
shares of the Corporation pursuant to the share buyback program will be subject to the discretion of the board of
directors of the Corporation and may depend on a variety of factors, including, without limitation, the Corporation's
business performance, financial condition, financial requirements, growth plans, expected capital requirements and
other conditions existing at such future time including, without limitation, contractual restrictions and satisfaction
of the solvency tests imposed on the Corporation under applicable corporate law. There can be no assurance of the
number of common shares of the Corporation that the Corporation will acquire pursuant to its share buyback
program, if any, in the future.
This document contains information that may be considered a financial outlook under applicable securities laws
about the Corporation's potential financial position, including, but not limited to: the Corporation's expectations
that substantially all free cash flow will be allocated to debt reduction until we reach our target range; the
Corporation's net debt target range and the expectation that the Corporation will achieve its net debt target in the
second half of 2026; Advantage's expectation that it will balance further debt reduction with opportunistic share
buybacks once reaching its net debt target range; the Corporation's 2026 capital guidance including its anticipated
cash used in investing activities, royalty rate, operating expense per boe, transportation expense per boe and
G&A/finance expense per boe; the anticipated costs of the Glacier Phase 2 capture equipment, compression,
transportation and storage wells and the installation of the modular power plant providing power and heat for the
Glacier Gas Plant and Entropy's CCS equipment; the terms of the Corporation's derivative contracts, including their
purposes, the timing of settlement of such contracts and the anticipated benefits to be derived therefrom; the
Corporation's estimated tax pools and its expectations that it will not be subject to cash taxes until calendar 2028;
the Corporation's commitments and contractual obligations and the anticipated payments in connection therewith
and the anticipated timing thereof; the anticipated undiscounted, uninflated cash flows required to settle the
Corporation's decommissioning liability and the anticipated timing that such costs will be incurred; all of which are
subject to numerous assumptions, risk factors, limitations and qualifications, including those set forth in the above
paragraphs. The actual results of operations of the Corporation and the resulting financial results will vary from the
amounts set forth in this document and such variations may be material. This information has been provided for
illustration only and with respect to future periods are based on budgets and forecasts that are speculative and are
subject to a variety of contingencies and may not be appropriate for other purposes. Accordingly, these estimates
are not to be relied upon as indicative of future results. Except as required by applicable securities laws, the
Corporation undertakes no obligation to update such financial outlook. The financial outlook contained in this
document was made as of the date of this document and was provided for the purpose of providing further
information about the Corporation's potential future business operations. Readers are cautioned that the financial
outlook contained in this document is not conclusive and is subject to change.
Advantage Energy Ltd. - 120
Oil and Gas Information
The term "boe" or barrels of oil equivalent and "Mcfe" or thousand cubic feet equivalent may be misleading,
particularly if used in isolation. A boe or Mcfe conversion ratio of six thousand cubic feet of natural gas equivalent
to one barrel of oil (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and
crude oil based on the current prices of natural gas and crude oil is significantly different from the energy
equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
This document contains metrics commonly used in the oil and natural gas industry which have been prepared by
management such as "operating income", "operating netback", "reserve additions", "reserves per share", "reserve
life index", "recycle ratio", "capital efficiency" "FD&A " and "F&D" which are described herein and below under
"Specified Financial Measures" and under "Specified Financial Measures" in the MD&A (the MD&A forms part of
this document). These terms do not have standard meaning and may not be comparable to similar measures
presented by other companies and, therefore, should not be used to make such comparisons. Management uses
these oil and natural gas metrics for its own performance measurements, and to provide shareholders with
measures to compare Advantage’s operations overtime. Readers are cautioned that the information provided by
these metrics, or that can be derived from metrics presented in this document, should not be relied upon for
investment or other purposes.
References in this document to short-term production rates, such as IP30 and IP90, are useful in confirming the
presence of hydrocarbons, however such rates are not determinative of the rates at which such wells will commence
production and decline thereafter and are not indicative of long-term performance or of ultimate recovery.
Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While
encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production of
Advantage.
Production estimates contained herein are expressed as anticipated average production over the calendar year. In
determining anticipated production for the year 2025 Advantage considered historical drilling, completion and
production results for prior years and took into account the estimated impact on production of the Corporation’s
2025 expected drilling and completion activities.
McDaniel was engaged as an independent qualified reserve evaluator to evaluate Advantage’s year-end reserves as
of December 31, 2025 and December 31, 2024 in accordance with NI 51-101 and the COGE Handbook. Reserves are
stated on a gross (before royalties) working interest basis unless otherwise indicated. Additional reserve information
as required under NI 51-101 are included in our Annual Information Form which is available at www.sedarplus.ca
and www.advantageog.com. Advantage’s year-end reserves as of December 31, 2023 disclosed in this document
were evaluated by Sproule ERCE in accordance with NI 51-101 and the COGE Handbook and using the IQRE average
product price forecast effective December 31, 2023. The recovery and reserve estimates of reserves provided in this
document are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual
reserves may eventually prove to be greater than, or less than, the estimates provided herein. It should not be
assumed that the discounted future net revenue estimated by Sproule and disclosed herein represents the fair
market value of the reserves.
References to natural gas, crude oil and condensate and NGLs production in this document refer to conventional
natural gas, shale gas, light crude oil and medium crude oil and natural gas liquids, respectively, product types as
defined in NI 51-101.
Advantage Energy Ltd. - 121
Specified Financial Measures
Throughout this document and in other documents disclosed by the Corporation, Advantage discloses certain
measures to analyze financial performance, financial position, and cash flow. These specified financial measures do
not have any standardized meaning prescribed under IFRS and therefore may not be comparable to similar
measures presented by other entities. The specified financial measures should not be considered to be more
meaningful than GAAP measures which are determined in accordance with IFRS, such as net income (loss) and
comprehensive income (loss), cash provided by operating activities, and cash used in investing activities, as
indicators of Advantage’s performance. Refer to "Specified Financial Measures" in the MD&A for additional
information about certain financial measures, including reconciliations to the nearest GAAP measures, as applicable.
The Corporation has additional specified financial measures, not included in the Corporation’s MD&A that have
been disclosed in this document, as follows:
Non-GAAP Ratios
Finding and Development Costs ("F&D")
F&D cost is calculated based on adding net capital expenditures excluding acquisitions and dispositions, and the net
change in future development capital ("FDC"), divided by the change in reserves within the applicable reserves
category for the year. Additionally, the Corporation discloses three-year average F&D cost, which is calculated based
on adding net capital expenditures excluding acquisitions and dispositions from 2025, 2024 and 2023, and the net
change in FDC from 2025, 2024 and 2023, divided by reserve additions from 2025, 2024 and 2023. Management
uses F&D costs as a measure of capital efficiency for organic reserves development.
Finding, Development & Acquisition Costs ("FD&A")
FD&A cost is calculated based on adding net capital and the net change in future development capital ("FDC"),
divided by the change in reserves within the applicable reserves category for the year. Additionally, the Corporation
discloses three-year average FD&A cost, which is calculated based on adding net capital expenditures from 2025,
2024 and 2023, and the net change in FDC from 2025, 2024 and 2023, divided by reserve additions from 2025, 2024
and 2023. Management uses FD&A costs as a measure of capital efficiency for organic and acquired reserves
development.
Recycle Ratio
Recycle ratio is calculated by dividing Advantage's fourth quarter operating netback by the calculated F&D cost or
FD&A cost of the applicable year and expressed as a ratio. Management uses recycle ratio to relate the cost of adding
reserves to a recent operating netback.
Capital Efficiency
Capital efficiency is calculated by dividing net capital expenditures, or a subset such as drill, complete, equipping and
tie-in ("DCET") spending, by the average production additions to replace the corporate decline rate and deliver
production growth, expressed in $/boe/d. Capital efficiency is considered by Management to be a useful performance
measure as a common metric used to evaluate the efficiency with which capital activity is allocated to achieve
production additions.
Advantage Energy Ltd. - 122
Supplementary Financial Measures
Reserve Additions Replaced
Reserve additions replaced is a supplementary financial measure that is calculated by dividing reserves net volume
additions by the current annual production and expressed as a percentage. Management uses this measure to
determine the relative change of its reserves base over a period of time.
Reserves Life Index
Reserves life index is a supplementary financial measure that is calculated by dividing the total volume of reserves
by the fourth quarter production rate and expressed in years.
Additional Information
Additional information relating to Advantage can be found on SEDAR+ at www.sedarplus.ca and the Corporation’s
website at www.advantageog.com. Such other information includes the annual information form, the management
information circular, press releases, material change reports, material contracts and agreements, and other financial
reports. The annual information form will be of particular interest for current and potential shareholders as it
discusses a variety of subject matter including the nature of the business, description of our operations, general and
recent business developments, risk factors, reserves data and other oil and gas information.
March 23, 2026
Advantage Energy Ltd. - 123
ABBREVIATIONS
Crude Oil and Natural Gas Liquids
Natural Gas
bbl
barrel
Mcf
thousand cubic feet
bbls
barrels
MMcf
million cubic feet
Mbbls
thousand barrels
bcf/d
billion cubic feet per day
NGLs
natural gas liquids
Mcf/d
thousand cubic feet per day
BOE or boe
barrel of oil equivalent
MMcf/d
million cubic feet per day
Mboe
thousand barrels of oil
equivalent
Mcfe
thousand cubic feet of natural gas equivalent, using the
ratio of 6 Mcf of natural gas being equivalent to one
bbl of oil
MMboe
million barrels of oil equivalent
MMcfe/d
million cubic feet of natural gas equivalent per day
boe/d
barrels of oil equivalent per day MMbtu
million British Thermal Units
bbls/d
barrels of oil per day
MMbtu/d
million British Thermal Units per day
GJ/d
Gigajoules per day
Other
AECO
a notional market point on the NGTL system, located at the AECO ‘C’ hub in Alberta, where the
purchase and sale of natural gas is transacted
CCS
carbon capture and storage
DCET
net capital expenditures required to drill, complete, equip and tie-in a well
Henry Hub
a central delivery location, located near Louisiana’s Gulf Coast connecting several intrastate and
interstate pipelines, that serves as the official delivery location for futures contracts on the NYMEX
MSW
Mixed Sweet Blend, the reference price paid for conventionally produced light sweet crude oil at
Edmonton, Alberta
NCIB
normal course issuer bid
PJM
a regional transmission organization that coordinates the movement of wholesale electricity in the
Mid Atlantic region of the US
TSX
Toronto Stock Exchange
WTI
West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for the
crude oil standard grade
Crude oil
"Light Crude Oil and Medium Crude Oil" as defined in National Instrument 51-101
Natural gas
"Conventional Gas" and "Shale Gas" as defined in National Instrument 51-101
"NGLs" &
"condensate"
"Natural Gas Liquids" as defined in National Instrument 51-101
Liquids
Total of crude oil, condensate and NGLs
IP30
Average initial peak production rate over 30 consecutive days after a well is brought on production
IP90
Average initial peak production rate over 90 consecutive days after a well is brought on production
Advantage Energy Ltd. - 124
Directors
Jill T. Angevine (2)(3)
Michael Belenkie
Deirdre M. Choate(1)(4)
Donald M. Clague (1)(2)
Daniel S. Farb(3)(4)(5)
John L. Festival(3)
Norman W. MacDonald(2)(4)(5)
Larry S. Massaro(2)(5)
Katherine L. Minyard(1)(3)
David G. Smith(1)(4)(5)
(1) Member of Audit Committee
(2) Member of Reserves and Health, Safety and Environment
Committee
(3) Member of Compensation Committee
(4) Member of Governance & Sustainability Committee
(5) Member of Special Committee
Officers
Michael Belenkie, President and CEO
Craig Blackwood, CFO
Neil Bokenfohr, Senior Vice President
John Quaife, Vice President, Finance
Darren Tisdale, Vice President, Geosciences
Geoff Keyser, Vice President, Development
Corporate Secretary
Jay P. Reid, Partner
Burnet, Duckworth and Palmer LLP
Auditors
PricewaterhouseCoopers LLP
Bankers
The Bank of Nova Scotia
National Bank of Canada
Royal Bank of Canada
Canadian Imperial Bank of Commerce
ATB Financial
The Toronto – Dominion Bank
Business Development Bank of Canada
Wells Fargo Bank N.A., Canadian Branch
Independent Reserve Evaluators
McDaniels & Associates Consultants Ltd.
Legal Counsel
Burnet, Duckworth and Palmer LLP
Transfer Agent
Computershare Trust Company of Canada
Corporate Office
2200, 440 – 2nd Avenue SW
Calgary, Alberta T2P 5E9
(403) 718-8000
Contact Us
Toll free: 1-866-393-0393
Email: ir@advantageog.com
Visit our website at www.advantageog.com
Toronto Stock Exchange Trading Symbols
AAV: Common Shares
AAV.DB: Debentures
Brian Bagnell, Vice President, Commodities and Capital Markets
Corporate Office
2200, 440 – 2nd Avenue SW
Calgary, Alberta T2P 5E9
(403) 718-8000
Contact Us
Toll free: 1-866-393-0393
Email: ir@advantageog.com
Visit our website at www.advantageog.com