PrairieSky Royalty : Financial document (2026 Q1 Financial Statements FINAL)

Published: 2026-04-20 16:05:14 ET PSK.TO

Published on 04/20/2026 at 04:05 pm EDT

‌INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE MONTHS ENDED

($ millions) Notes

Assets

Current assets

Accounts receivable and accrued royalty revenue Prepaids

3, 14

$ 109.1

0.4

$ 63.3

0.7

109.5

64.0

Royalty assets, net

950.3

969.5

Exploration and evaluation assets

1,468.1

1,482.6

Goodwill

631.0

Total Assets

$ 3,158.9

$ 3,147.1

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable and accrued liabilities

68.8

37.7

Income tax payable

1.4

1.1

Dividend payable

61.6

60.5

131.8

99.3

Bank debt

7, 14

235.4

241.2

Lease obligation

1.2

Share-based compensation payable

15.1

15.0

Deferred income taxes

247.1

247.8

Total Liabilities

630.6

604.5

Shareholders' Equity

Shareholders' capital

3,311.5

3,315.3

Paid in surplus

6.0

Deficit

(789.2)

(778.7)

Total Shareholders' Equity

2,528.3

2,542.6

Total Liabilities and Shareholders' Equity

$ 3,158.9

$ 3,147.1

See accompanying Notes to the Interim Condensed Consolidated Financial Statements.

($ millions, except per share amounts) Notes 2026 2025

Revenues

Royalty production revenue Other revenue

$ 118.5

15.3

$ 119.9

8.2

Revenues

133.8

128.1

Expenses

Administrative

18.3

8.4

Production and mineral taxes

1.1

1.3

Depletion, depreciation and amortization

36.6

36.8

Exploration and evaluation

1.3

2.2

Earnings before finance items and income taxes

76.5

79.4

Finance Items

Finance expense

3.1

2.9

Earnings before income taxes

73.4

76.5

Income tax expense

17.6

18.1

Net Earnings and Comprehensive Income

$ 55.8

$ 58.4

Net Earnings per Common Share

Basic and diluted

$ 0.24

$ 0.25

See accompanying Notes to the Interim Condensed Consolidated Financial Statements.

($ millions) Notes

Balance at December 31, 2025

$ 3,315.3

$ 6.0

$ (778.7)

$ 2,542.6

Net earnings

55.8

Common shares repurchased and cancelled, inclusive of all costs

(3.8)

(4.7)

(8.5)

Dividends on common shares

(61.6)

Balance at March 31, 2026

$ 3,311.5

$ 6.0

$ (789.2)

$ 2,528.3

($ millions) Notes

Balance at December 31, 2024

$ 3,404.2

$ 6.0

$ (667.5)

$ 2,742.7

Net earnings

58.4

Common shares repurchased and cancelled, inclusive of all costs

(48.7)

(43.1)

(91.8)

Dividends on common shares

(61.2)

Balance at March 31, 2025

$ 3,355.5

$ 6.0

$ (713.4)

$ 2,648.1

See accompanying Notes to the Interim Condensed Consolidated Financial Statements.

($ millions) Notes 2026 2025

Operating Activities

Net earnings

$ 55.8

$ 58.4

Depletion, depreciation and amortization

36.6

36.8

Exploration and evaluation

1.3

2.2

Deferred tax expense (recovery)

(0.7)

0.8

Share-based compensation, net of cash settlements

1.7

(12.5)

Amortization of debt issuance costs

0.2

0.1

Funds from operations

94.9

85.8

Net change in non-cash working capital

(15.7)

4.9

Cash From Operating Activities

79.2

90.7

Investing Activities

Royalty asset acquisitions

(1.4)

(32.4)

Exploration and evaluation acquisitions

(2.8)

(31.2)

Cash Used in Investing Activities

(4.2)

(63.6)

Financing Activities

Bank debt draws (repayments)

(6.0)

124.6

Dividends paid on common shares

(60.5)

(59.9)

Common shares repurchased, inclusive of all costs

(8.5)

(91.8)

Cash Used in Financing Activities

(75.0)

(27.1)

Change in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Period

Cash and Cash Equivalents, End of Period

$ -

The following are included in cash flow from operating activities: Income taxes paid in cash

$ 18.2

$ 19.0

Interest paid in cash

2.6

Interest received in cash

0.2

See accompanying Notes to the Interim Condensed Consolidated Financial Statements.

NOTES TO THE MARCH 31, 2026 AND 2025 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(TABULAR AMOUNTS IN $ MILLIONS UNLESS NOTED OTHERWISE)

PrairieSky Royalty Ltd. ("PrairieSky" or the "Company") has a geologically and geographically diverse portfolio of fee simple mineral title ("Fee Lands"), lessor interests in and to leases that are currently issued in respect of certain Fee Lands ("Lessor Interests"), oil and natural gas overriding royalty interests, gross overriding royalty interests, net profit interests and production payments on lands (collectively, "GORR Interests") and other acreage spanning Alberta, Saskatchewan, British Columbia and Manitoba (collectively, the "Royalty Properties"). The Company is focused on encouraging third parties to actively develop the Royalty Properties, while strategically seeking additional oil and natural gas royalty assets that provide the Company with short, medium and long-term value enhancement potential. The Company does not directly conduct operations to explore for, develop or produce oil or natural gas; rather, third-party development of the Royalty Properties provides the Company with royalty revenue as oil and natural gas are produced from such properties.

The Company's shares are publicly traded on the Toronto Stock Exchange ("TSX") under the stock symbol "PSK". The location of the head and registered office of the Company is Suite 1700, 350 - 7thAvenue S.W., Calgary, Alberta, T2P 3N9.

STATEMENT OF COMPLIANCE

These unaudited interim condensed consolidated financial statements (the "financial statements") have been prepared in accordance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting and should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2025. They do not include all of the information required for a complete set of IFRS financial statements; however, select explanatory notes are included to explain events and transactions that are significant to an understanding of the changes to the Company's financial position and performance since the last annual financial statements.

These financial statements have been prepared on a historical cost basis, except for share-based payment transactions. The financial statements have been prepared on a going concern basis and amounts are in millions of Canadian dollars unless otherwise stated.

These financial statements were approved and authorized for issuance by the Company's board of directors (the "Board") on April 20, 2026.

ACCOUNTING POLICIES AND USE OF ACCOUNTING ESTIMATES AND JUDGMENTS

Accounting policies, estimates, judgments and assumptions used in these financial statements are consistent with those described in Note 3 of the Company's audited annual consolidated financial statements as at and for the year ended December 31, 2025.

NEW AND AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS

The Company adopted amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures on January 1, 2026. The amendments clarify the date of recognition and derecognition of financial assets and liabilities. The adoption did not have a material impact on the Company's financial statements.

($ millions)

Trade receivables and accrued royalty revenue

Production and mineral taxes receivable

76.7

32.4

63.3

109.1

63.3

Trade receivables and accrued royalty revenue relate to lease and royalty production payments receivable. Production and mineral taxes are billed annually in March for the province of Alberta and are recorded in accounts payable (refer to Note 6). The amount to be recovered from third-party lessees is recorded in accounts receivable.

In determining the recoverability of trade receivables that are past due but not impaired, the Company considers the age of the outstanding receivables and the credit worthiness of the counterparties (refer to Note 14). Of the Company's outstanding receivables at March 31, 2026, none are aged over 90 days (December 31, 2025 - $nil) and the Company is satisfied its accounts receivable and accrued royalty revenue amounts are collectible.

($ millions)

Notes

Cost

Balance, December 31, 2024

2,343.6

Asset acquisitions

41.8

Asset dispositions

(0.7)

Transfers from exploration and evaluation assets

89.0

Balance, December 31, 2025

2,473.7

Asset acquisitions

Transfers from exploration and evaluation assets 5

1.4

16.0

Balance, March 31, 2026

2,491.1

Balance, December 31, 2024 (1,353.8)

Depletion, depreciation and amortization (150.4)

Balance, December 31, 2025 (1,504.2)

Depletion, depreciation and amortization

(36.6)

Balance, March 31, 2026

(1,540.8)

Carrying Amounts

Balance, December 31, 2025

969.5

Balance, March 31, 2026

950.3

For the three months ended March 31, 2026, the Company recorded $1.4 million in royalty interest acquisitions primarily in Central Alberta.

For the three months ended March 31, 2025, the Company recorded $32.4 million in royalty asset acquisitions for producing oil and natural gas Lessor Interests and GORR Interests. Acquisitions included the purchase of Fee Lands, Lessor Interests and GORR Interests primarily in Central Alberta and Southeast Saskatchewan for cash consideration of $49.9 million, before final purchase price adjustments, from a private company (the "Private Co. Royalty Acquisition") which closed on January 10, 2025. Of the

total purchase price, $31.6 million was included in royalty assets which represents the value attributed to producing royalty assets.

($ millions)

Notes

Balance, December 31, 2024

1,517.7

Asset acquisitions

58.1

Transfers to royalty assets

(89.0)

Land expiries

(4.2)

Balance, December 31, 2025

1,482.6

Asset acquisitions

Transfers to royalty assets 4

Land expiries

2.8

(16.0)

(1.3)

Balance, March 31, 2026

1,468.1

For the three months ended March 31, 2026, E&E assets acquired totaled $2.8 million comprised of GORR Interests on non-producing assets. Acquisitions were focused on oil plays in both Alberta and Saskatchewan primarily targeting the Basal Quartz and Mannville plays.

For the three months ended March 31, 2025, E&E assets acquired totaled $31.2 million comprised of Fee Lands and GORR Interests on non-producing assets. E&E assets included $18.3 million of non-producing royalty interests acquired through the Private Co. Royalty Acquisition.

For the three months ended March 31, 2026, $1.3 million (three months ended March 31, 2025 - $2.2 million) of costs associated with expired Crown mineral leases and GORR Interests were recognized as exploration and evaluation expense. The expense will vary period to period as a result of the timing of such Crown mineral lease expiries, if any.

($ millions) Notes

Trade payables

3.2

4.6

Production and mineral taxes payable

36.2

2.7

Accrued liabilities for cash settled share-based compensation

18.8

17.2

Current portion of lease obligation

0.1

Other accrued liabilities

10.5

13.1

Accounts payable and accrued liabilities

68.8

37.7

Production and mineral taxes are billed annually in March for the province of Alberta and the gross amount is recorded in accounts payable. Amounts recoverable from third-party lessees are recorded in accounts receivable (refer to Note 3).

($ millions)

Borrowings under Credit Facility

Unamortized debt issuance costs

236.7

(1.3)

242.7

(1.5)

Bank debt

235.4

241.2

At March 31, 2026, the Company had a $575 million extendible revolving credit facility (the "Revolving Facility") and a $25 million extendible operating credit facility (the "Operating Facility", and together with the Revolving Facility, the "Credit Facility"), with a syndicate of Canadian banks. The Credit Facility may be extended on an annual basis, subject to lender consent, and has a maturity date of February 28, 2028.

At March 31, 2026, $236.7 million was drawn on the Credit Facility (December 31, 2025 - $242.7 million). Borrowings under the Credit Facility bear interest at a Canadian bank prime rate, U.S. base rate, Canadian Overnight Repo Rate Average ("CORRA"), or Secured Overnight Financing Rate ("SOFR"), plus applicable margin on a variable grid based on certain financial ratios, over the prevailing applicable rate for the type of loan. The effective interest rate for the three months ended March 31, 2026 was 4.9% (three months ended March 31, 2025 - 5.9%). Included in interest expense for the three months ended March 31, 2025 were fees related to a letter of credit which were reimbursed by a third party and included in other income.

During the three months ended March 31, 2026 and March 31, 2025, there were no debt issuance costs incurred. Previously incurred debt issuance costs have been netted against bank debt and are being amortized over the remaining term. For the three months ended March 31, 2026, total amortization of debt issuance costs related to prior years was $0.2 million (three months ended March 31, 2025 - $0.1 million).

The Credit Facility has three financial covenants, whereby the Company's ratio of adjusted consolidated senior debt to EBITDA for the trailing 12 months will not exceed 3.5:1.0, adjusted consolidated total debt to EBITDA for the trailing 12 months will not exceed 4.0:1.0, and adjusted consolidated total debt to capitalization ratio will not exceed 55%. EBITDA used in the covenant calculation is net earnings adjusted for non-cash items, interest expense and income taxes. All covenants are calculated as at, and for the 12 months ended March 31, 2026. As at March 31, 2026, the Company was in compliance with all covenants provided for in the lending agreement and forecasts compliance with all covenants over the next 12 months.

The following table provides a list of the financial covenants as at March 31, 2026:

Covenant description(1) Ratio March 31, 2026

Adjusted Consolidated Senior Debt to EBITDA

Maximum 3.5:1

0.55

Adjusted Consolidated Total Debt to EBITDA

Maximum 4.0:1

0.55

Adjusted Consolidated Total Debt to Capitalization

Maximum 55%

8.6%

(1) Capitalized terms are as defined in the Credit Facility agreement.

AUTHORIZED

The authorized share capital of the Company includes an unlimited number of common shares and an unlimited number of preferred shares issuable in series. The holders of the common shares are entitled to one vote in respect of each common share held at all meetings of shareholders, except meetings at which only holders of a specified class of shares have the right to vote. The common shares have no par value.

ISSUED AND OUTSTANDING

Common shares outstanding, beginning of period

Common shares repurchased and cancelled

232,712

(269)

3,315.3

(3.8)

238,952

(6,240)

3,404.2

(88.9)

Common shares outstanding, end of period

232,443

3,311.5

232,712

3,315.3

NORMAL COURSE ISSUER BID ("NCIB")

On May 30, 2025, the Company announced the approval of the renewal of its NCIB by the TSX. The NCIB allows the Company to purchase for cancellation up to a maximum of 15,355,946 common shares over a twelve-month period which commenced on June 4, 2025 and expires no later than June 3, 2026.

During the three months ended March 31, 2026, the Company purchased for cancellation 269,077 common shares (three months ended March 31, 2025 - 3,415,900 common shares) at an average cost of

$30.83 per common share (three months ended March 31, 2025 - $26.36 per common share) for total consideration of $8.3 million (three months ended March 31, 2025 - $90.0 million), inclusive of commissions, and before tax of $0.2 million (three months ended March 31, 2025 - $1.8 million). The total cost paid, including commissions, was first charged to share capital up to the average carrying value of the common shares purchased. The remaining amount of $4.7 million (three months ended March 31, 2025 - $43.1 million), inclusive of tax, was recorded to the deficit.

DIVIDENDS

On February 9, 2026, the Board declared a quarterly dividend of $0.265 per common share or $61.6 million payable on April 15, 2026 to common shareholders of record on March 31, 2026.

($ millions, except $ per share data) 2026 2025

Dividends declared

Dividends declared per share

61.6

0.265

61.2

0.260

Dividends paid

60.5

59.9

Dividends paid per share

0.260

0.250

NET EARNINGS PER COMMON SHARE

The following table presents the computation of net earnings per common share:

($ millions, except $ per share or as otherwise noted) 2026 2025

Net earnings

55.8

58.4

Weighted average common shares outstanding (millions) - basic and diluted

232.7

238.3

Net earnings and comprehensive income per common share - basic and diluted

0.24

0.25

The Company has a number of share-based compensation arrangements under which the Company awards various types of long-term incentive grants to eligible employees, officers and directors. They include performance share units ("PSUs"), restricted share units ("RSUs"), officer deferred share units ("ODSUs") and deferred share units ("DSUs").

The Company accounts for its share-based compensation arrangements as cash-settled share-based payment transactions and accrues compensation costs and dividends over the vesting period based on the fair value at each reporting date.

The Company has recognized the following share-based compensation costs:

($ millions) 2026 2025

PSU expense

4.6

0.5

RSU expense

0.7

0.5

ODSU expense

2.9

0.1

DSU expense

3.0

0.1

Share-based compensation expense

11.2

1.2

The following liability for cash-settled share-based payment transactions includes the liability for vested and unvested cash-settled plans. Included with the liability for vested cash-settled plans are long-term incentive grants that are eligible to vest under the Company's retirement policy.

($ millions)

Liability for unvested cash-settled plans

Liability for vested and eligible to vest cash-settled plans

8.3

25.6

13.1

19.1

Liability for cash-settled plans

33.9

32.2

($ millions) Notes

Current portion 6

Non-current portion

18.8

15.1

17.2

15.0

Liability for cash-settled plans

33.9

32.2

The liability for vested cash-settled DSUs held by non-executive directors of $10.6 million (December 31, 2025 - $7.6 million) included in accounts payable and accrued liabilities becomes payable only when a director is no longer a member of the Board.

The market common share price used for all cash-settled share-based compensation fair value calculations at March 31, 2026 was $32.20 (March 31, 2025 - $25.95).

PERFORMANCE SHARE UNITS

PSUs granted to officers and eligible employees entitle the grantee to receive upon vesting a cash payment that is equal to the value of one common share of the Company for each PSU held, plus accrued dividends over the period from the date of grant to vesting, and may only be settled with a cash payment, and not common shares, equal to the five-day weighted average trading price for the common shares multiplied by the number of vested PSUs. PSUs vest following the completion of a three-year performance period provided the grantee remains actively employed with the Company on the vesting date and certain performance criteria are met.

The ultimate value of the PSUs will depend upon the Company's performance relative to predetermined performance targets measured over a three-year period. The Board has adopted a multiple performance criteria methodology, including the Company's TSR, for measuring the payout multiplier upon vesting of the PSUs. TSR is defined as share price appreciation plus dividends, relative to the TSR for a predetermined performance peer group. Based on this assessment, a range of zero to two times the original PSU grant, at the discretion of the Board, may be eligible to vest in respect of the three-year trailing period being measured.

The following table summarizes information related to the PSUs:

Outstanding PSUs (thousands of units)

Issued and outstanding, December 31, 2024

578.5

Granted

140.3

Units, in lieu of dividends

20.8

Vested

(232.8)

Issued and outstanding, December 31, 2025

506.8

Granted

Units, in lieu of dividends Vested

140.4

4.0

(172.4)

Issued and outstanding, March 31, 2026

478.8

For the three months ended March 31, 2026, the Company recorded a compensation expense of $4.6 million (three months ended March 31, 2025 - $0.5 million) related to PSUs. At March 31, 2026, the remaining weighted average life of outstanding PSUs is 1.7 years.

During the three months ended March 31, 2026, 172,400 units from the 2023 PSU grant, inclusive of dividend entitlements, vested resulting in a cash payout of $7.6 million (three months ended March 31, 2025 - 232,800 units, inclusive of dividend entitlements, from the 2022 PSU grant, vested resulting in a cash payout of $11.9 million).

RESTRICTED SHARE UNITS

RSUs granted to eligible employees and officers entitle the grantee to receive upon vesting a cash payment that is equal to the value of one common share for each RSU held, plus accrued dividends over the period from the date of grant to vesting, and may only be settled with a cash payment, and not common shares, equal to the five-day weighted average trading price for the common shares multiplied by the number of vested RSUs. RSUs vest evenly over a three-year period provided the grantee remains actively employed with the Company on the vesting date.

The following table summarizes information related to the RSUs:

Outstanding RSUs (thousands of units)

Issued and outstanding, December 31, 2024

136.9

Granted

58.7

Units, in lieu of dividends

4.8

Vested

(65.7)

Forfeited

(10.3)

Issued and outstanding, December 31, 2025

124.4

Granted

51.4

Units, in lieu of dividends

0.9

Vested

(63.5)

Forfeited

(1.2)

Issued and outstanding, March 31, 2026

112.0

For the three months ended March 31, 2026, the Company recorded compensation expense of $0.7 million (three months ended March 31, 2025 - $0.5 million) related to RSUs. At March 31, 2026, the remaining weighted average life of outstanding RSUs is 1.5 years.

During the three months ended March 31, 2026, the cash payout related to vested RSUs was $1.9 million (three months ended March 31, 2025 - $1.8 million), comprised of 63,500 units (three months ended March 31, 2025 - 65,700 units), inclusive of dividend entitlements.

OFFICER DEFERRED SHARE UNITS

ODSUs have been granted to officers of the Company and entitle the officer to receive, upon departure from the Company, a cash payment that is equal to the value of one common share for each vested ODSU held, adjusted to account for reinvested dividends over the period from the date of grant to the date vested ODSUs are redeemed, which redemption date must be selected by the officer within 15 business days of the officer's departure from the Company. The cash payment to the officer is to be paid, at the Company's discretion, no later than December 31 of the first calendar year commencing after the date of the officer's departure.

ODSUs are settled in a cash payment equal to the closing price per common share immediately prior to the redemption date, multiplied by the number of settled ODSUs, as further described below. ODSUs vest evenly over a three-year period, provided the officer remains actively employed with the Company on the vesting date. ODSUs are not paid and/or settled until such time as the officer ceases to be an employee of the Company.

The following table summarizes information related to the ODSUs:

Outstanding ODSUs (thousands of units)

Issued and outstanding, December 31, 2024

338.7

Granted

71.3

Units, in lieu of dividends

17.8

Issued and outstanding, December 31, 2025

427.8

Granted

Units, in lieu of dividends

69.1

4.1

Issued and outstanding, March 31, 2026

501.0

For the three months ended March 31, 2026, the Company recorded a compensation expense of $2.9 million (three months ended March 31, 2025 - $0.1 million) related to ODSUs. At March 31, 2026, 108,100 ODSUs have not yet vested and the remaining weighted average time until vesting is 0.4 years.

There were no cash payouts related to ODSUs during the three months ended March 31, 2026 or March 31, 2025.

DEFERRED SHARE UNITS

Directors receive an annual compensation amount in DSUs and have the option to receive Board and Committee retainers and fees in the form of DSUs, which vest immediately. These DSUs are equivalent to a common share adjusted to account for reinvested dividends over the period from date of grant and vesting to the date of redemption and are settled in cash. DSUs can only be redeemed following departure from the Company and must be redeemed prior to December 15thof the year following departure. For the three months ended March 31, 2026, the majority of the directors elected to receive their annual Board and Committee retainers and fees in the form of DSUs.

DSUs are settled in a cash payment equal to the closing price per common share immediately prior to the redemption date, multiplied by the number of settled DSUs inclusive of dividend entitlements, as further

described below. DSUs are not paid and/or settled until after such time as the director ceases to be a director of the Company.

The following table summarizes information related to the DSUs:

Outstanding DSUs (thousands of units)

Issued and outstanding, December 31, 2024

496.5

Granted

38.1

Units, in lieu of dividends

20.6

Redeemed

(269.7)

Issued and outstanding, December 31, 2025

285.5

Granted

Units, in lieu of dividends

41.4

2.8

Issued and outstanding, March 31, 2026

329.7

For the three months ended March 31, 2026, the Company recorded a compensation expense of $3.0 million (three months ended March 31, 2025 - $0.1 million) related to DSUs.

There were no cash payouts related to DSUs during the three months ended March 31, 2026 or March 31, 2025.

The Company's royalty production revenue is determined pursuant to the terms of its royalty agreements. The transaction price for crude oil, NGL and natural gas is based on the commodity price in the month of production, adjusted for quality, location, allowable deductions, if any, or other factors. Commodity prices are based on market indices that are determined on a monthly or daily basis.

Royalty production revenue is generally received two months after the crude oil, NGL and natural gas are produced. For royalty production volumes taken-in-kind, revenue is typically collected on the 25th day of the month following production. Lease rental revenue for the entire primary term is recorded when the lease is executed. Lease rental revenue for any subsequent period is recorded as due which is generally annually on the anniversary of the lease extension. Both the amount and timing of bonus consideration revenue can vary significantly from period to period as it is recorded when a new lease is executed and relates to the unique circumstances of each lease transaction.

($ millions)

Crude oil

98.3

101.1

NGL

10.8

10.1

Natural gas

9.4

8.7

Other revenue

118.5

119.9

Lease rental income

1.0

1.1

Bonus consideration

12.3

5.0

Other income

2.0

2.1

15.3

8.2

Revenues

133.8

128.1

($ millions)

Lessor Interests on Fee Lands

70.5

74.6

GORR Interests

48.0

45.3

Royalty production revenue

118.5

119.9

Other revenue

15.3

8.2

Revenues

133.8

128.1

At March 31, 2026, receivables from contracts with customers, which are included in accounts receivable and accrued royalty revenue, totaled $76.7 million (December 31, 2025 - $63.3 million).

($ millions) Notes 2026 2025

Salaries and benefits

4.7

4.6

Share-based compensation

11.2

1.2

Office expense

0.8

0.9

Public company expense

0.8

Information technology

0.8

0.9

Administrative expenses

18.3

8.4

($ millions) 2026 2025

Current tax expense

Deferred tax expense (recovery)

18.3

(0.7)

17.3

0.8

Income tax expense

17.6

18.1

The Company's objective when managing its capital structure is to maintain financial flexibility in order to distribute cash to shareholders in the form of dividends and common share repurchases under the NCIB after consideration of the Company's financial requirements for its business and future growth opportunities. As a royalty company, PrairieSky does not have capital expenditure requirements, which enhances its financial flexibility.

The Company's capital structure is comprised of bank debt, shareholders' equity and working capital. The Company's capital structure is managed by taking into account operating activities, dividends paid to shareholders, common share repurchases under the NCIB, taxes, liquidity available under the Credit Facility (refer to Note 7) and other factors. The Company's operating results and capital structure are impacted by the level of development activity by third parties on the Royalty Properties and the resultant royalty production volumes, commodity prices and level of costs incurred by the Company.

($ millions) Notes

Shareholders' equity

2,528.3

2,542.6

2,648.1

Working capital deficiency

22.3

35.3

39.9

Bank debt

235.4

241.2

218.9

Net debt

257.7

276.5

258.8

Capitalization

2,786.0

2,819.1

2,906.9

The Company's capital structure is managed through its financial and operating forecast process. The forecast of the Company's future cash flows is based on estimates of production, crude oil, natural gas and NGL prices, other revenue, production and mineral tax expense, administrative expenses, current taxes and other investing and financing activities. The forecast is regularly updated based on changes in commodity prices, production expectations and other factors that in the Company's view could impact cash flow. The preparation of financial forecasts requires management to make assumptions and estimates which may prove incorrect over time. As a result, there may be adverse changes in cash flows, working capital or debt levels that are currently unforeseen.

During the three months ended March 31, 2026, the Company generated funds from operations of $94.9 million, repurchased and cancelled common shares under the NCIB for $8.5 million, inclusive of all costs, paid dividends of $60.5 million and made net acquisitions for $4.2 million. The Company had a working capital deficiency of $22.3 million at March 31, 2026 and bank debt of $235.4 million. The Company's working capital includes $10.6 million (December 31, 2025 - $7.6 million) related to the liability for vested cash-settled DSUs issued to non-executive directors which becomes payable only when a director is no longer a member of the Board (refer to Note 9).

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The fair values of accounts receivable and accrued royalty revenue, accounts payable and accrued liabilities, and dividend payable approximate their carrying amount due to the short-term maturity of those instruments. Bank debt bears interest at a floating market rate with applicable variable margins, and accordingly, the fair market value approximates the carrying amount.

RISKS ASSOCIATED WITH FINANCIAL ASSETS AND LIABILITIES

The Company is exposed to financial risks arising from its financial assets and liabilities. Financial risks include market risk (such as commodity price risk and interest rate risk), credit risk and liquidity risk.

Commodity price risk is the risk the Company will encounter fluctuations in its future royalty production revenue with changes in commodity prices. Commodity prices for crude oil, NGL and natural gas may be impacted by global and regional factors, including levels of supply and demand, weather, geopolitical factors, including the imposition of tariffs and/or global conflicts, and the Canadian to US dollar exchange rate. The Company does not hedge its commodity price risk.

The Company is exposed to interest rate risk on its Credit Facility. Interest rate risk arises from changes in market interest rates that may affect the fair value or future cash flows from the Company's financial assets or liabilities. Assuming all other variables held constant for the three months ended March 31, 2026, a 1% change (plus or minus) in the interest rate would have resulted in a corresponding change to net earnings before taxes of $0.6 million. Bank debt bears interest at a floating market rate with applicable variable margins.

Credit risk arises from the potential that the Company may incur a loss if a counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. A substantial portion of the Company's accounts receivable are from royalty agreements with oil and natural gas industry operators and are subject to normal industry credit risks. The Company's diversified revenue stream limits the size of any one property or industry operator with respect to total receivables. In addition, the Company takes certain of its production in-kind to mitigate credit risk and in certain cases, has put a letter of credit in place with producers.

The Company has no outstanding receivables aged over 90 days at March 31, 2026 (December 31, 2025 - $nil) and the Company is satisfied its accounts receivable amounts are collectible. As at March 31, 2026, one counterparty had a balance owing that individually accounted for approximately 15% of the total accounts receivable balance. The maximum credit risk exposure associated with accounts receivable and accrued royalty revenue is the total carrying value.

Liquidity risk is the risk that the Company will encounter difficulties in meeting a demand to fund financial liabilities as they come due. The Company manages its liquidity risk using cash and debt management programs, including financial forecasting. At March 31, 2026, the Company had unused capacity under its Credit Facility of $363.3 million (refer to Note 7).

The timing of expected cash outflows relating to accounts payable and accrued liabilities of $68.8 million, income tax payable of $1.4 million and dividend payable of $61.6 million is less than one year. Included in accounts payable and accrued liabilities is $10.6 million related to vested cash-settled DSUs issued to non-executive directors which become payable only when a director is no longer a member of the Board. Management maintains a conservative approach to debt management that aims to provide financial flexibility with respect to acquisitions, share buybacks and the dividend rate. The Board reviews and determines the dividend policy after considering expected commodity prices, foreign exchange rates, royalty production volumes, economic conditions, income taxes, bank debt and PrairieSky's capacity to fund its expenses and investing opportunities, including common share repurchases under the NCIB.

NET CHANGE IN NON-CASH WORKING CAPITAL

($ millions) 2026 2025

Source (use) of cash:

Accounts receivable and accrued royalty revenue

(45.8)

(33.5)

Prepaids

0.3

Accounts payable and accrued liabilities

29.5

38.0

Income tax payable

0.3

0.1

Changes in non-cash working capital

(15.7)

4.9

Related to operating activities

(15.7)

4.9

BOARD OF DIRECTORS

Margaret A. McKenzie(1)Anna M. Alderson(2)(4)Anuroop S. Duggal(2)(3)Ian C. Dundas

P. Jane Gavan(2)(3)Glenn A. McNamara(3)(4)Andrew M. Phillips Sheldon B. Steeves(3)(4)

Chair of the Board.

Member of the Audit Committee. Ms. Alderson is the Chair of the Audit Committee.

Member of the Governance and Compensation Committee. Mr. McNamara is the Chair of the Governance and Compensation Committee.

Member of the Reserves Committee. Mr. Steeves is the Chair of the Reserves Committee.

OFFICERS

Andrew M. Phillips,

President & Chief Executive Officer

Pamela P. Kazeil,

Senior Vice-President, Finance & Chief Financial Officer

Daniel J. Bertram,

Vice-President, Business Development & Chief Commercial Officer

Michael T. Murphy,

Vice-President, Geosciences & Capital Markets

TORONTO STOCK EXCHANGE TRADING SYMBOL

PSK

INDEPENDENT RESERVE EVALUATORS GLJ Ltd.

TRANSFER AGENT

Odyssey Trust Company AUDITORS

KPMG LLP

BANKERS

Toronto-Dominion Bank CORPORATE OFFICE

Suite 1700 - 350 7 Avenue S.W.

Calgary, AB T2P 3N9

Fax: 587.293.4001

[email protected]

Disclaimer

PrairieSky Royalty Ltd. published this content on April 20, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 20, 2026 at 20:04 UTC.