Bonterra Energy: Navigating Low Oil Prices with Strategic Asset Development and AECO Price Recovery

In the volatile landscape of North American energy markets, Bonterra Energy has emerged as a case study in resilience. As oil prices remain under pressure and natural gas markets grapple with oversupply, the company's strategic focus on production efficiency and alignment with AECO price recovery timelines offers a compelling narrative for investors. By leveraging operational discipline and forward-looking capital allocation, Bonterra is positioning itself to weather near-term headwinds while capitalizing on anticipated market improvements.

AECO Price Recovery: A Catalyst for Growth

The Alberta Energy Company (AECO) price, a critical benchmark for Canadian natural gas, has long been a source of concern for producers. However, recent projections suggest a turning point. According to a report by GLJ Research, AECO prices are expected to average $2.05 per MMBtu in 2025, a recovery from the depressed levels of 2024. This optimism is further reinforced by the Alberta Energy Regulator (AER), which forecasts a rise in AECO-C prices to Cdn$2.71/GJ in 2025, with a long-term trajectory toward Cdn$4.37/GJ by 2034, driven by LNG Canada's export ramp-up and seasonal demand dynamics.

The forward curve also tells a story of optimism. By 2026, the AECO-Henry Hub differential is projected to narrow to US$1.00/MMBtu, reflecting improved market fundamentals. Notably, the 2026 AECO strip is already priced nearly US$1 higher than the second-half 2025 strip, signaling investor confidence in a late-2025 and winter 2025–2026 price rebound. S&P Global Ratings has echoed this sentiment, noting that lower oil prices could paradoxically support AECO recovery through reduced gas-to-oil price differentials.

Strategic Asset Development: Efficiency as a Shield

Bonterra Energy's 2025 preliminary budget underscores its commitment to operational efficiency and disciplined capital allocation. The company has maintained production within a range of 14,600 to 14,800 BOE per day, with 52–54% oil and liquids, while capping capital expenditures at $65 million to $75 million-fully funded by internal cash flows. This approach prioritizes high-impact projects, with 60% of capital directed to the Charlie Lake core area, a strategic hub for its Montney and Cardium plays.

The results of this strategy are already evident. In the first nine months of 2025, Bonterra achieved a 7% year-over-year production increase, averaging 15,600 BOE per day. Operational optimizations, including well reactivation, have reduced costs to $16.92 per BOE, a figure the company aims to sustain despite initial infrastructure charges. These efficiencies are critical in offsetting the drag from low oil prices, which saw the company report a 20% year-over-year decline in revenue to C$55.2 million in Q3 2025.

Hedging and Forward Pricing: Mitigating Volatility

To insulate itself from price swings, Bonterra has adopted a robust hedging strategy. The company has secured 34% of its crude oil production and 22% of its natural gas production through the third quarter of 2025. Additionally, it has locked in forward pricing for 6,679 GJ per day at $3.10 to $3.30 per GJ for late 2026 and early 2027, aligning its exposure with the anticipated AECO recovery. These measures not only stabilize cash flows but also provide a buffer against the volatility that has plagued the sector.

Alignment with AECO Recovery: A Timely Strategy

Bonterra's operational and financial strategies are meticulously timed to coincide with expected AECO price improvements. The company's production guidance for 2025 includes a deliberate gap in wells coming online in the second half of the year, a decision that prioritizes cost control over short-term output. This timing aligns with the projected AECO recovery in late 2025 and 2026, ensuring that new wells will operate in a higher-price environment.

Moreover, the company's focus on the Charlie Lake and Montney plays-areas with strong well performance, such as the 4-28 well producing 530 BOE per day-positions it to capitalize on improved gas prices. As AECO prices climb, these assets will transition from cost centers to profit drivers, amplifying the impact of the recovery on Bonterra's bottom line.

Conclusion: A Model for Resilience

Bonterra Energy's approach to navigating low oil prices is a masterclass in strategic asset development and market timing. By prioritizing efficiency, hedging against volatility, and aligning its capital program with AECO price recovery, the company has created a framework for sustainable growth. While the near-term challenges persist, the alignment of its operational cadence with the forward curve suggests that Bonterra is not merely surviving the current downturn but positioning itself to thrive in the next upcycle. For investors, this represents a compelling case of disciplined execution in a sector starved for it.