Paramount Resources: A Strategic Rebirth Through Core Focus and Montney Might

In an era where energy companies are increasingly pressured to prove their adaptability, Paramount Resources (PMX.TO) has embarked on a bold pivot—one that could redefine its future. By divesting $3.3 billion in non-core assets and doubling down on its crown jewel, the Sinclair Montney project, the company is signaling a return to its roots as a high-margin, liquids-rich producer. The question now is: Can this shift unlock sustained value, or is it a gamble in a volatile sector?

### The Sale: A Strategic Retreat to Fortify the Core
Paramount's January 2025 sale of its Karr, Wapiti, and Zama properties marked a decisive break from underperforming assets. By offloading these non-core holdings, the company reduced its reliance on gas-heavy regions and redirected capital toward its liquids-rich Montney holdings. The transaction, which also included securing Horn River Basin properties, wasn't merely a cost-cutting move—it was a strategic reallocation to focus on higher-margin opportunities.

With $638 million in net cash post-sale and an undrawn $500 million credit facility, Paramount's balance sheet is now its strongest in years. This liquidity buffer is critical as it ramps up spending on the Sinclair Montney project, which now accounts for 70% of its 2025 natural gas sales volumes being priced outside the AECO market—a move that slashes exposure to regional price volatility.



### The Sinclair Gamble: 24-16 MMcf/d Test Rates and the $400 MMcf/d Prize
The heart of Paramount's pivot lies in the Sinclair Montney. The first two appraisal wells there delivered 24 MMcf/d and 16 MMcf/d of dry gas over their final three-day tests, with lower-than-expected H2S content—a critical factor for processing costs. These results have justified a $20–$50 million investment in preliminary engineering for a 400 MMcf/d processing facility, which could be operational by late 2025.

The facility's significance extends beyond immediate production: It preserves the option to sanction full-scale development by 2027 while allowing Paramount to lock in long-lead equipment orders. Combined with secured transportation capacity, this creates a clear path to a 2027 production ramp-up. But the real game-changer is the project's potential to deliver 40,000–45,000 Boe/d by year-end . . . and an exit rate exceeding 45,000 Boe/d, with liquids rising to 52% of output.

### Hedged Fortunes and the Liquids-Levered Playbook
Paramount's financial discipline is equally compelling. By hedging 10,000 Bbl/d of oil at C$105/Bbl—a price above most 2025 forecasts—and securing basis swaps for natural gas, the company has insulated itself against commodity slumps. This hedging strategy, paired with its liquids-rich portfolio, positions it to capitalize on rising demand for oil and dry gas in global markets.



The near-term capex spike to $780–840 million—driven by the Sinclair facility—could weigh on short-term returns. But this is a calculated trade-off: By front-loading costs, Paramount aims to secure a multi-year production growth trajectory. The Alhambra plant's Phase 1 startup in Q4 2025, processing 10,000 Bbl/d of liquids, will further amplify this momentum.

### Risks and the Case for Long-Term Value
No investment is without risk. Commodity prices could dip, regulatory hurdles could delay the facility, and execution at Sinclair might fall short. Yet Paramount's actions—debt reduction, geographic diversification, and high-margin asset focus—mitigate these concerns. The $15.00 per share special distribution and share repurchases in Q1 also signal confidence in the company's cash flow resilience.

### The Bottom Line: A Buy With an Eye on 2027
Paramount's pivot to core, liquids-rich assets and its aggressive reinvestment in Sinclair Montney represent a disciplined strategy to convert resource potential into shareholder value. While the 2025 capex surge may pressure near-term metrics, the long-term payoff—a 52% liquids portfolio, a 400 MMcf/d processing hub, and a path to 45,000+ Boe/d—justifies a bullish stance.

Investors seeking exposure to North American energy's next wave should consider Paramount. Its blend of hedged stability, high-margin assets, and a clear growth roadmap makes it a compelling buy, even if the full rewards won't crystallize until 2027. For those with the patience to wait, this could be a return to the company's roots—and a profit.