Presidio Production Company (FTW) Q3 2026 earnings review
Presidio raises its dividend, but cash profit falls 12%
Presidio Production Company, a Texas operator that buys and runs older oil and gas wells, pumped more fuel after its July purchase of Canyon Creek but earned less cash profit as oil prices and hedge gains fell. Third-quarter revenue rose 6% from last quarter to $57 million on a 15% jump in daily output, yet Adjusted EBITDA dropped 12% to $29 million. Co-chief executive Will Ulrich still raised the quarterly dividend to $0.375 per share, while software tools lifted output on existing wells by 3.2%.
| Daily oil and gas production | 26.1 MBoe/d +15% from last quarter (-1% ex-Canyon Creek by our math) |
|---|---|
| Adjusted EBITDA (cash profit ex one-offs) | $29.1M -12% from last quarter; matched August outlook |
| Quarterly common dividend | $0.375/share +11% from last quarter ($1.50/year) |
| FY26 AI production uplift target | Unchanged 3–5% target; 3.2% reached in Q3 |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because the third quarter confirmed both sides of the case without settling the payout debate. Integrating Canyon Creek cut unit field costs and the software tools crossed the bottom of the full-year production target, but weaker prices per barrel and a 77% jump in interest costs squeezed the cash left over for the higher dividend.
The question now is whether Presidio's hedged wells generate enough cash after interest and preferred payouts to fund the $1.50 annual dividend without selling more land or borrowing. One view is that long-term gas hedges and software gains lock in the payout; the other is that natural field declines and fixed financing claims leave little margin for error. The full cash flow statement in the third-quarter 10-Q filing will show the true cash coverage.
🐂 Bull Case
Software Tools Lifted Output From Existing Wells
Presidio uses artificial intelligence software to pump more oil and gas from mature wells without spending money on new drilling. The Fort Worth producer aims to lift output across its existing wells by 3% to 5% in 2026. In the third quarter, its Asset Intelligence programs added 3.2% to production, up from 2.3% in the second quarter and inside the full-year target range.
- Mainspring operating system: monitors well data and sends repair alerts to field engineers across roughly 2,300 operated wells
- Automated plunger lifts: running on 25 wells, adjusting cycles from live pressure data instead of fixed timers
- Shut-in well restarts: software identified idle wells that turn a profit at lower water-disposal rates, with one restarted in October and ten more planned by year-end
- The Gauntlet: a new coding platform built under chief technology officer Jason Hudak "where AI agents do much of the coding and testing"
What to watch: fourth-quarter output from legacy wells once the ten shut-in wells return. Sustained gains above 3% would show that software can offset the natural drop in older fields without fresh drilling cash.
Canyon Creek Wells Cut Unit Field Costs
Presidio buys older producing fields and cuts their running costs by plugging them into its own field network. July's purchase of Canyon Creek in the Arkoma Basin drove a 15% jump in daily output from last quarter to 26.1 thousand barrels of oil equivalent per day. Co-chief executive Chris Hammack said his team "moved the wells onto our production systems, right-sized compression and changed chemical vendors" during the quarter.
Those steps lowered lease operating expense — the daily cost of running the wells — from $9.39 to $9.10 per barrel of oil equivalent. In October, the oil and gas operator paid $4.3 million in cash for extra working interests in Arkoma wells it already runs, and it has sold $17.0 million of unleased Oklahoma land this year to recycle cash.
What to watch: lease operating expense per barrel in the fourth quarter after a full period of the October Arkoma bolt-on. A further drop toward $9.00 would confirm that buying nearby wells lowers unit field costs.
🐻 Bear Case
Lower Prices Cut Cash Profit Despite More Wells
Co-chief executive Will Ulrich said the third quarter showed "continued execution of our acquisition and optimization strategy" as Canyon Creek contributed its first full quarter. Yet adding 15% more daily production only lifted revenue by 6.2% from last quarter to $57.3 million, and Adjusted EBITDA — cash profit from operations excluding one-offs — fell 12.3% to $29.1 million. By our math, daily production outside Canyon Creek dipped about 0.9% from last quarter.
- Average price before hedges: $23.72 per barrel of oil equivalent, down 8.5% from $25.93 in the second quarter
- Average price after cash hedges: $25.49 per barrel, down 12.8% from $29.24 as cash hedge gains shrank from $6.9 million to $4.3 million
- Oil price before hedges: $82.60 per barrel vs $94.38 in the second quarter, while oil's share of output fell from 16% to 13%
- Implied fourth-quarter Adjusted EBITDA: $27.7 million by our math from the August nine-month target, down another 4.7%
The company's swaps capped oil at $60.02 per barrel while boosting natural gas from $1.46 to $3.51 per thousand cubic feet. Because Canyon Creek added mostly gas and natural gas liquids, the shift toward cheaper fuels compressed profit per barrel faster than new volume could replace it.
What to watch: fourth-quarter Adjusted EBITDA before hedge gains, which slipped 5.6% this quarter to $24.8 million. Another drop would show that field additions are not keeping pace with weaker oil prices and natural field decline.
Higher Dividend Meets Shrinking Profit and More Debt
Presidio pitches itself as a high-payout income producer and raised its quarterly common dividend by 11% to $0.375 per share, or $1.50 per year. At the same time, the company issued 1.96 million new Class A shares to the sellers of Canyon Creek, lifting its combined Class A and Class B share count by 7.3% from last quarter to 31.5 million shares.
By our math, the $1.50 payout rate requires $47.2 million a year across all common shares, or $11.8 million a quarter. Before common shareholders get paid, Presidio covers interest expense — which jumped 76.8% from last quarter to $7.6 million — and $5.4 million in preferred stock and unvested stock-unit dividends. Those fixed claims leave thin room inside $29.1 million of quarterly Adjusted EBITDA, even with capital spending at just $0.4 million.
What to watch: the full cash flow statement in the upcoming third-quarter Form 10-Q filing. It will show whether operating cash flow after interest and preferred payouts actually covered the $11.8 million common dividend without leaning on asset sales.
Risks this quarter didn't answer
The third-quarter earnings release omitted the cash flow statement and several operating details needed to test standing risks, leaving those readings for the conference call or the Form 10-Q filing.
- Operating cash flow and free cash flow: omitted from the release tables, leaving dividend coverage after working capital and cash interest unreadable until the 10-Q.
- Wedge workover program: management previously slated 44 remaining well-maintenance jobs for completion by the fourth quarter, but the release gave no count of completed jobs.
- Base production decline rate: the natural drop of the pre-Canyon Creek wells without software or maintenance work was not disclosed.
- Series A preferred stock terms: the balance sheet shows the Series A subscription amount rose from $125.4 million to $126.6 million including paid-in-kind dividends, without splitting cash payouts from accrued stock.
👓 Other Themes
Non-Cash Hedge Marks Drove a $51M Accounting Loss
Presidio reported a third-quarter net loss of $50.7 million, or $1.80 per Class A share, reversing a $15.5 million net profit in the second quarter. A $66.5 million non-cash accounting charge from marking multi-year commodity hedges to quarter-end market prices caused the swing. Stripping out that paper loss, a $4.5 million earnout gain, and a $13.8 million tax benefit leaves a $2.6 million loss by our math.
💲 Other KPIs
Operating profit fell from $6.06 million in the second quarter to $0.56 million, cutting the operating margin by 10.3 percentage points to 1.0% of revenue. Acquisition and transaction costs for closing Canyon Creek rose by 5.7 percentage points of revenue to $3.82 million, while lease operating expenses rose by 2.2 points to 38.2% of revenue.
Net debt — total principal debt minus cash and restricted cash — rose by $52.9 million from the second quarter after Presidio drew $54.3 million on its warehouse credit line to buy Canyon Creek. Net debt sits at 2.8 times the last six months' annualized Adjusted EBITDA, up from 2.7 times last quarter, with $97.4 million of liquidity remaining.
Total common shares rose 7.3% from the second quarter after Presidio handed 1.96 million Class A shares to the sellers of Canyon Creek in July. The company also carries 126,628 Series A preferred shares with a $126.6 million subscription balance and Series B preferred stock that can convert into another 2.72 million Class A shares.
🔮 Guidance
Unchanged. The Asset Intelligence team still targets 3% to 5% production growth across Presidio's existing wells in 2026 without new drilling spending. Third-quarter programs added 3.2% to output, crossing the bottom of the full-year target range after reaching 2.3% in the second quarter. Restarting ten shut-in wells by year-end is the next lever to reach the 4% middle of the range.
❓ Key Questions
What was operating cash flow in the third quarter?
The earnings release omitted the cash flow statement. Investors need third-quarter operating cash flow to see how much cash remained after $7.6 million of interest and any cash preferred dividends to cover the raised common payout.
Does the company stand by its $90 million nine-month target?
The release said third-quarter Adjusted EBITDA of $29.1 million was "in line with the outlook provided in August" but gave no fourth-quarter numbers. By our math, the prior $90 million nine-month target leaves $27.7 million for the fourth quarter.
How much did pre-Canyon Creek production fall on its own?
Daily production rose by 3.3 thousand barrels of oil equivalent per day, while Canyon Creek brought roughly 3.5 thousand at close. That implies legacy output shrank slightly even with a 3.2% boost from software tools.
How much of the $5.4 million preferred dividend was paid in cash?
The income statement deducts $5.4 million for preferred stock and unvested stock-unit dividends, while the Series A subscription balance grew by $1.2 million from paid-in-kind dividends. The cash portion directly reduces money available for common dividends.