How much cash does PrairieSky really make, and what is a share of it worth?

The words on this page

Real cash (true cash)

What was left in the bank each year after every bill, every tax payment and every well drilled. Not profit, and not "cash flow" as companies usually quote it, which leaves the drilling out. The strictest number there is.

Required return

The yearly return you insist on for taking the risk. A dollar promised in ten years is worth less than a dollar today; this rate says how much less. 9% is a common professional figure for a large Canadian producer; the reserve engineers use 10%.

Well life (reserve life)

How long the wells keep producing. After the life you choose, nothing is counted.

What a share is worth

Every future year's cash, shrunk back to today's dollars at your required return, added up, less the debt, divided by the number of shares. Pay less than this and you earn more than your required return; pay more and you earn less.

Where the default growth comes from

Third-party drilling has pushed PrairieSky's royalty production to successive records and funds from operations have grown roughly 6 per cent a year over the decade, but that pace leaned on commodity prices, so the growth dial starts at a more careful 3 per cent.

The arithmetic, step by step

1. Count the real cash each past year: cash generated by operations as reported, plus interest paid put back, minus rent on leases, minus every dollar spent on wells and plants. Buying and selling assets is shown separately.
2. Project it. The starting cash you choose (an average of the history, or the latest year) grows at your growth dial for ten years, then at the long-run rate for as long as the wells keep producing. Nothing is counted after the well life ends.
3. Bring it back to today. Each year's cash is shrunk by your required return, counted at mid-year because cash arrives through the year rather than on 31 December.
4. Turn it into a share value. Add up the shrunk cash; take off net debt of C$175M; divide by 232.4M shares.
5. Work it backwards. "The growth today's price assumes" is the ten-year growth rate at which this start is worth exactly the share price.

Where the numbers come from

• A royalty owner has no reserve life of its own: how long the cash keeps flowing depends on other companies drilling PrairieSky's lands, so the model simply assumes a 25 year life.
• Royalty companies spend almost nothing on capital, so capital spending is shown as zero; all of PrairieSky's outlay is acquisitions of royalty acreage, shown in the acquisitions line. The 2021 figure is dominated by the $728 million Heritage Royalty purchase, funded with new bank debt and a $220 million share issue.
• Net debt is bank debt less cash from the audited statements. PrairieSky's own net debt measure also counts working capital and was $186.6 million at 30 June 2026 and $276.5 million at year end 2025, versus the $174.9 million and $241.2 million used here. Before 2021 the company mostly carried no debt and a small cash balance.
• Interest for 2019 to 2025 is the cash interest paid disclosed in the audited supplementary cash flow information. The 2016 to 2018 statements disclose no cash figure, so those years use the income statement's finance expense (0.2, 0.1 and 0.8 million), mainly standby fees on undrawn credit lines.
• Dividends are the whole return story: the payout was cut through 2020 and 2021 while the Heritage debt was repaid, then rebuilt to $242.8 million in 2025, and buybacks resumed with $161.7 million of repurchases in 2025.
• Lease payments are the small office lease amounts deducted in financing; before IFRS 16 arrived in 2019 they sat inside operating costs and are shown as zero.
• Share issues for acquisitions (2017 and 2021) moved the diluted share count, which has since come back down through buybacks to 232.4 million shares outstanding.
• Every history year was hand-checked line by line against the audited statements listed below on 1 September 2026; each cash flow section cross-foots to its printed subtotal.
• Analyst targets: average C$36.63 across 12 analysts (stockanalysis.com analyst consensus, 30 August 2026).

For the technically minded

The method is the one used to evaluate capital projects, from Ted Lawrence, The Business Guide to Economic Evaluations: Projects, Leases, Tariffs and Acquisitions (2017). "Real cash" is the book's project cash flow (chapter 3) with depreciation, debt servicing and debt-like leases restructured out (chapters 4, 5 and 19); short operating leases stay in as a cost of producing, a chapter 19 judgment. The value per share follows the share-purchase evaluation of chapter 20: present value of the company's cash flows at the cost of capital (chapter 10), mid-year discounting (chapter 12), plus non-required assets, less net debt and the decommissioning liability. "What you gain or lose" is the bid-curve NPV of chapter 20; "when you get your money back" is the discounted payout of chapter 13; the bars follow the project profile of chapter 6. The reverse solve on growth is a plain reverse DCF.

Discount-rate anchors: 9% is a common cost-of-equity figure for a large Canadian producer and 10% is the reserve-report convention (PV10). The long-run rate defaults to 0% here: a depleting resource should not be assumed to grow forever, so anything above zero is a judgment you make with the dial.