PRESIDIO PRODUCTION Co Q2 FY2026 earnings call

Core Business Model & Strategic Pillars

• Business model: Acquire producing, cash-flowing U.S. oil and gas assets, optimize productivity and costs with AI and operational discipline, finance efficiently, and return cash to shareholders via dividends, with no new drilling or large capital expenditures.
• Four core strategic pillars: (1) Attractive cash return via dividend; (2) Disciplined growth via acquisition, supported by unique capital market access; (3) Low-capital production and cost optimization; (4) AI-driven operational improvement that ties all other pillars together.

Operational Achievements

• AI-driven production uplift: Delivered a 2.3% total well-level production uplift in Q2 2026, against a full-year 2026 target of 3% to 5%. 1.4% of uplift came from Doug, the company's proprietary production surveillance AI agent, which generated 400 BOE per day of incremental production. Additional gains came from AI-enabled weekend production scheduling (2.5% Q2 weekend production increase with no added headcount) and AI-enabled plunger boxes (10% production lift on the 24 installed wells, adding 0.2% to total company production). Approximately 2,000 wells are now connected to the company's AI platform.
• Safety performance: Zero recordable injuries, zero days away from work cases, and zero vehicular incidents across ~2,000 wells in three states for the first half of 2026, achieved via employee-led safety governance.
• Asset integration and cost optimization:
  • EQVR asset integration is substantially complete, delivering a 30% reduction in monthly LOE from $700,000 to $500,000 via labor restructuring, compression optimization, vendor renegotiation, and full systems integration.
  • Post-close execution at Canyon Creek (42 operated wells, 3,500 net BOE per day, entry to the Arcoma Basin) is on track, with early operational changes already implemented, targeting a 32% reduction in monthly LOE from $250,000 to $170,000. Canyon Creek establishes a new "land and expand" basin platform for future adjacent acquisitions.
  • Wedge workover program: 25 of 69 identified jobs are complete, with actual payout compressed to 0.75 years from the original forecast of 1 year, and returns exceeding 100% for Q2 2026 completed workovers, outperforming expectations.
• Leasehold monetization: Realized $13 million in cash consideration over the trailing 12 months through July 2026 from selling undeveloped acreage that is more valuable to third parties, providing incremental recurring funding for operations.

Capital Structure & Financing Milestones

• Completed a $350 million investment-grade ABS refinancing in Q2 2026, reducing the weighted average coupon by 184 basis points to 6.38% from 8.22%. The new structure reduces near-term scheduled amortization, freeing more cash for dividends and acquisitions, and introduces industry-unlimited refinancing flexibility with no punitive prepayment penalties.
• Completed the first draw on the $1 billion ABS acquisition warehouse (now joined by Citizens Bank with 40% participation) to fund the Canyon Creek acquisition, demonstrating the warehouse works as designed.
• Pro forma leverage after Canyon Creek is approximately 2.7x net debt to annualized adjusted EBITDA, with total pro forma liquidity of ~$102.3 million.

Dividend

• Current annualized dividend is $1.35 per share, representing a ~12% yield at recent share prices. The company intends to raise the dividend once Canyon Creek assets begin contributing cash flow, subject to board approval.

Presidio Production Company operates as a single integrated segment of acquiring and optimizing mature producing oil and gas assets in the U.S. For Q2 2026: total revenue including hedge settlements was $60.9 million, with $6.9 million in realized hedge settlements. Net income attributable to Presidio was $14.4 million ($0.34 per Class A share). Adjusted EBITDA was $33.2 million, beating prior guidance of $30 million by 10.7%. Free cash flow was $15.7 million (~$0.50 per share). Production averaged 22,755 barrels of oil equivalent (BOE) per day, with a product mix of 16% oil, 57% natural gas, and 27% NGLs. Lease operating expense (LOE) was $9.39 per BOE, and total operating expense including taxes was $11.22 per BOE. Capital expenditure for the quarter totaled $600,000. The closed Canyon Creek acquisition (July 1, 2026 post-quarter end) is not included in Q2 2026 financial results.

• Full-year 2026 AI-driven production uplift target is maintained at 3% to 5%, with 2.3% already achieved in the first half of the year, putting the company on track to meet the full-year target.
• Adjusted EBITDA guidance for the final two quarters of 2026 (Q3 and Q4) expects EBITDA to come in very slightly below $30 million per quarter, bringing total adjusted EBITDA for the last nine months of 2026 to $90 million.
• The wedge workover program is projected to be completed in Q4 2026, with 44 jobs remaining in the current queue.
• Management expects to complete remaining Canyon Creek integration projects (yard consolidation, full SCADA integration) by the end of Q3 2026.
• The company maintains a large, attractive acquisition pipeline of approximately $17 billion, and management expects to close the next acquisition in short order, while remaining disciplined on price and returns.

• All forward-looking statements (including AI uplift targets, acquisition timelines, and dividend increases) are subject to material risks and uncertainties, many outside of the company's control, that could cause actual results to differ materially from expectations. Key risks are detailed in the company's SEC filings and earnings release cautionary language.
• Commodity price volatility affects acquisition pricing expectations and near-term EBITDA, though the company mitigates this via a systematic hedging program.
• Acquisition execution depends on competitive bidding, and there is no guarantee that targeted deals will close on favorable terms or at all.
• Integration of new assets and scaling of AI technology may not deliver expected production uplift or cost savings at the projected pace.

Q: Neil Dingman (William Blair) asked what operational and financial low-hanging improvements Presidio targets immediately after closing an acquisition like Canyon Creek. / A: On the operational side, Presidio focuses on three core improvement levers: manpower optimization, compression utilization, and in-house chemical cost management. The Arcoma Basin's Canyon Creek assets fit the company's playbook perfectly, as the prior owner focused on new drilling development rather than day-to-day mature asset optimization, creating clear upside for Presidio's operational discipline. On the financing side, Presidio uses either its $1 billion ABS warehouse (for larger transactions) or its RBL facility (for smaller deals) to fund acquisitions, and only pursues deals that are accretive to free cash flow per share and dividend per share, targeting ~20% equity levered returns. The company also immediately implements its rigorous FP&A and data systems to embed operational financial discipline.

Q: Dingman asked for additional detail on cost savings from the Doug AI platform, and how quickly savings are realized. / A: Doug is currently focused on production growth rather than cost savings, by identifying daily production anomalies at the well level, prioritizing the largest underperformers, and providing troubleshooting recommendations to field pumpers. A separate AI tool focused on cost savings will launch in fall 2026. Doug also enables knowledge sharing across the field team, aggregating troubleshooting experience from all pumpers to help less experienced staff resolve issues faster. 100% of the field team already uses the tool, with incremental improvements delivered as the model learns from new data.

Q: Sherif El-Meghabri (BTIG) asked how higher near-term commodity prices affect deal pricing, and where Presidio sees remaining M&A opportunities for the rest of 2026. / A: Higher commodity strips do increase seller price expectations, making absolute deal prices higher, but Presidio hedges new acquisitions immediately after closing to lock in projected equity returns, so the company still can achieve its target returns even in this environment. More sellers have brought assets to market amid current geopolitical instability, creating more high-quality opportunities for Presidio's selective process. For M&A geography, the company sees the most opportunities adjacent to its existing positions in the Western Anadarko and Arcoma Basins, with additional attractive prospects across Texas and Oklahoma, focusing on mature producing assets where the prior owner focused on drilling rather than mature asset optimization.