Headwater Exploration Inc. Appoints Cheree Stephenson: A Strategic Move to Drive Growth and Financial Discipline

The appointment of Cheree Stephenson as a director of Headwater Exploration Inc. (TSX: HWX) marks a pivotal moment for the oil and gas producer. With over 25 years of experience in finance and leadership roles across the energy sector, Stephenson’s expertise aligns seamlessly with Headwater’s ambitious 2025 strategic priorities. Her strong shareholder support—securing 97.89% of votes cast—reflects confidence in her ability to steer the company toward enhanced production, disciplined capital allocation, and sustainable shareholder returns.

The Case for Cheree Stephenson’s Leadership

Stephenson’s credentials are deeply rooted in the oil and gas industry. As CFO of Topaz Energy Corp. since 2020, she played a key role in transitioning the company from a private entity to a publicly traded one, while driving M&A deals that fueled earnings growth. Her career at Ernst & Young (EY) as a Chartered Professional Accountant (CPA, CA) provided a foundation in audit and risk management, while her roles as CFO at Petrus Resources and Controller at Peyto Exploration honed her skills in financial stewardship and operational oversight.

Her appointment underscores Headwater’s focus on financial rigor and governance. With the company’s 2025 capital budget totaling $225 million—allocated to secondary recovery, exploration, and operational efficiency—Stephenson’s experience in balancing growth with fiscal prudence will be critical.

Headwater’s Strategic Priorities: A Deep Dive

1. Secondary Recovery Expansion

Headwater aims to double its 2025 secondary recovery spending to $50 million, targeting the Clearwater sandstone and E formations. By year-end, secondary recovery is expected to account for 50% of oil production, with stabilized volumes in the Marten Hills core already exceeding 500 barrels per day (bbls/d). This strategy leverages low-decline, long-life reserves, reducing reliance on high-cost drilling.

2. Exploration and Development

The $25 million exploration budget will fund tests of 5–7 new plays, including the Clay Prospect (16-section potential with a 60-day initial production rate of 201 bbls/d) and the Bluesky formation in the Little Horse/Greater Nipisi area. These projects align with Headwater’s goal of 10% production growth per share in 2025.

3. Financial Discipline and Dividends

• Dividend Increase: A 10% raise to $0.11 per common share (effective April 15, 2025) is supported by a 47% reinvestment rate of adjusted funds flow, assuming $70/bbl WTI.
• Hedging: 83% of McCully field’s winter production is hedged at Cdn$11.58/mmbtu, securing $12 million in free cash flow through April 2025.
• Liquidity: The company targets a $37 million positive exit working capital balance by year-end, ensuring flexibility amid commodity price volatility.

Risks and Considerations

Headwater’s strategy hinges on assumptions about commodity prices ($70/bbl WTI, $79.40/bbl WCS) and operational execution. Risks include:
- Geopolitical Volatility: Conflicts in the Middle East or Russia-Ukraine war impacts on oil markets.
- Weather Events: Alberta wildfires could disrupt production or asset integrity.
- Cost Inflation: Rising service costs could strain margins if not offset by production growth.

Conclusion: A Strong Foundation for Growth

Stephenson’s appointment signals Headwater’s commitment to financial acumen and operational excellence. With her leadership, the company is well-positioned to execute its 2025 goals:
- Secondary recovery will add 50% of oil production by year-end, reducing capital intensity.
- Exploration could unlock 15–20 section pools in key formations, driving long-term reserves.
- Dividend sustainability is reinforced by $12 million in hedged cash flow and a disciplined reinvestment rate.

Investors should monitor HWX’s Q2 2025 production updates and hedging performance as key metrics. With Stephenson’s track record and Headwater’s focused strategy, the stock could outperform peers in a rising oil price environment.

In short, Cheree Stephenson’s arrival marks a strategic inflection point for Headwater, blending seasoned financial leadership with the operational ambition needed to capitalize on energy sector opportunities.