Greenfire Resources Ltd. (GFR) Q2 2025 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Welcome to the Greenfire Resources Second Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I will now turn the meeting over to Mr. Robert Loebach, Vice President, Commercial. Please go ahead, Robert.

Thank you, operator. Good morning, and welcome to Greenfire's conference call for our Q2 2025 results. Please note that today's call includes forward-looking statements and references non-GAAP and other financial measures. We encourage you to review the associated risks detailed in our latest MD&A. Unless stated otherwise, all monetary figures discussed today are in Canadian dollars. Capital expenditures and production figures presented today are based on our working interest net to Greenfire, unless noted otherwise. Joining us on today's call are key members of the Greenfire leadership team, including Adam Waterous, Executive Chairman; Colin Germaniuk, President; Jonathan Kanderka, Chief Operating Officer. Upon conclusion of our prepared remarks, we'll open the floor to questions from analysts. I will now hand the call over to Colin.

Good morning, and thank you, everyone, for joining Greenfire's Q2 2025 Conference Call. On this morning's call, there are 3 topics I would like to discuss before opening the call up to questions from our analysts. First, I will provide an update on Greenfire's current year operations. Second, I will provide a progress update on our longer-term development plans. And third, I'll provide some brief background on our Greenfire's new VP Finance, Travis Belak, we are very excited about. As previously discussed last quarter, 2025 has been a challenging year for Greenfire operationally, which to recap is due to 3 reasons. One, in February, one of our 4 boilers at the expansion asset unexpectedly had to be taken offline for repairs, which has reduced our production by approximately 1,500 to 2,300 barrels a day since that time. Two, also in February, it was brought to the company's attention that Greenfire's sulfur dioxide emissions may have risen above the maximum level permitted by the Alberta energy regulator. And three, Greenfire has historically underinvested in new wells, which has resulted in most of the existing production today being relatively mature with relatively high recovery factors. Over the past few months, Greenfire has made considerable progress addressing each of these challenges, which I would like to briefly touch on. Regarding the boiler outage, the boiler repair remains on schedule with full steam capacity available by year-end 2025. Regarding the sulfur emissions, Greenfire is currently procuring a sulfur removal unit to be installed at the expansion asset, which we expect to be operational by year-end 2025. And regarding the historical underinvestment in new well-pairs, Greenfire has considerably advanced our inaugural SAGD pad, Pad 7, which is expected to start drilling in Q4 of this year. Finally, now that the Greenfire team has a better handle on the trajectory of current year operations, we are prepared to share our 2025 production and capital guidance. In 2025, we expect to produce between 15,000 and 16,000 barrels a day of bitumen, and we expect to invest $130 million in capital expenditures. Greenfire's planned 2025 capital program includes the acceleration of approximately $35 million of Pad 7 capital from 2026 into 2025 with the intention of potentially achieving first steam on Pad 7 at an earlier date. I would now like to move on to the second topic, that being the advancement of our longer-term development plans. Over the past few months, the primary focus of our team has been on the development of Pad 7. Pad 7 is situated to the northeast of our expansion central processing facility and directly offsets existing production at Pad 6, giving us high confidence in the region's recoverable resource. The current plan is for the Pad 7 well-pairs to include 13 well-pairs at Pad 7 with lateral lengths ranging from 800 meters to 1,400 meters. Drilling is expected to start in the fourth quarter of this year with first oil forecasted to be in Q4 2026. Furthermore, given the long cycle times associated with new SAGD pad development, Greenfire is also evaluating some shorter cycle drilling opportunities to be completed concurrently with Pad 7 in 2026, including the potential for infill wells at the expansion and redrill wells at the devil. Lastly, moving to the third topic. It was announced in this morning's news release that Greenfire has hired a new VP of Finance, Travis Belak, who will replace Greenfire's prior CFO and VP Finance and become the most senior person in charge of Greenfire's finance team. Travis was most recently the Corporate Controller at HWN Energy and brings approximately 15 years of experience in upstream oil and gas financial reporting, corporate planning, tax and treasury. Travis, together with the leadership of the Waterous Energy Fund team, leaves Greenfire in the hands of excellent financial stewards of capital. And finally, I'd like to thank Tony Kraljic for his contributions to Greenfire. His leadership and efforts have left a lasting positive impact on the company, and we're grateful for the role he played in helping shape our path forward. This concludes our planned remarks for the Q2 conference call, and we'll now open it up to questions.

[Operator Instructions] Our first question today will come from Jason Wangler of Imperial Capital.

I wanted to just ask, obviously, the production level at the Demo Asset really looked pretty strong. You mentioned there was some optimization, but just curious if you could expand on kind of what you're seeing there? And is that something that can continue, I guess, there and as well, obviously, as you move to the expansion?

Yes. It's Colin Germaniuk here. We drilled 2 wells earlier in Q1 that have been coming online and ramping up nicely. We're adding 800 barrels roughly each to really boost production there. And we're looking at more options at the demo and the expansion similar to these wells.

Okay. And maybe it goes to that question. You talked about a few minutes ago, looking at some shorter cycle things at expansion as well as obviously, the kind of the drilling that you're going to be doing for the next -- in the next quarter. How do you look at '26? I know it's early, obviously, but do you think that the CapEx run rate of kind of where you're looking this year is similar? Is it more? That's obviously -- it's a ways away, but just how do you guys look at what your thoughts are next year as you kind of continue to get everything where you want to operationally?

This is Adam Waterous, Jason. I'll take that call. So we're not at a point yet where we can provide guidance for 2026. Maybe just to step back, sometimes it's easy to get kind of lost in all this -- all the numbers. And it's good to try to just understand if you're trying to put 2026 is trying to understand maybe where the transition of the company is coming from. So the -- I'd put it more simply is that much of the past operational decisions of the company came from a -- I would describe it one of the old look ma, no hands. It was -- this is a company that look [ ma, ] no equity. And the company, when they bought the JCOS asset, we're very proud of the fact that they put no equity in the business, and it was entirely debt financed, like that was some kind of trick. That was some kind of accomplishment. Overleveraging the balance sheet, which is what the net result of that caused a lot of decisions operationally, which we are having to unwind. And the first sort of impact on that, which led to a very highly, highly capital-constrained business, is there were only short-cycle wells drilled, which generally were fast decline. The second problem was a lot of basic maintenance was not done. And most obviously, there was not proper sulfur emissions infrastructure put in place. And what that led to is the deterioration of at least one boiler on it. So it was, hey, you know what, we don't need to put oil in the engine. We'll skip through the regular oil changes. And now the engine got room on it. And the third thing that happened is that the development plan was extremely ambitious in terms of very long wells that went through multiple different heights and turns with the thought, Hey, we'll go super long wells and save money by doing that on a per meter basis. These were the double back flip of the full twist wells. So what we have had to do is that all 3 of those things change how the business is being operated. Number one, we're going to be drilling the first well-pairs that Greenfire has actually ever drilled. The second is we're obviously putting in self-recovery units and repairing the boiler. And the third thing is on this Pad 7, this is going to -- is designed to be a much more conventional type of development pad and hopefully, therefore, considerably less execution risk. But all that is in the context of the business still remains grossly over levered. I mean the original bonds that were put in place are still in place, and that is causing a huge amount of interest to be paid, not only -- but also just restrictions on how the business is being operated, how much capital gets spent. So I just give that by way of background, Jason, is the -- your question is a very fair and reasonable one is, geez, what do you think about next year, 2026. But I would emphasize the very dramatic change in the operations that's been required as part of the turnaround on this. Now having said all that, we do expect to be able to provide at a later time more guidance for 2026, but we just can't at this time.

No, the answer is a lot better than the question was. Maybe just asked a different way just for our understanding, how much of this year is that, I guess, unwinding of spend? And how much maybe more is next year? Or are you predominantly done and then you kind of get to start how you want to run the programs as you get to '26? Is that a fair way to look at it?

I think it's fair to look at that we have unwound a lot of what has happened. But we are just at the very beginning stages of executing the development plan. But there's always a certain unwinding process and then there is a move forward process. But I would really emphasize your question is a reasonable one about for 2026, but we're just not in a position to be able to provide specific guidance at this time.

Ladies and gentlemen, at this time, we will be concluding the question-and-answer session. I'd like to turn the conference back over to Mr. Robert Loebach for any closing remarks.

Thank you, operator. On behalf of Greenfire, we appreciate you joining us on our Q2 2025 results conference call. Have a great day.

And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.