Prepared remarks
Good morning, ladies and gentlemen. Welcome to the Greenfire Resources Second Quarter 2025 Results Conference Call. (Operator provides instructions.) The conference is being recorded. (Operator provides instructions.) I will now turn the meeting over to Mr. Robert Loebach, Vice President, Commercial. Please go ahead, Robert.
Thank you, operator. Good morning, and welcome to Greenfire's conference call for our Q2 2025 results. Please note that today's call includes forward-looking statements and references non-GAAP and other financial measures. We encourage you to review the associated risks detailed in our latest MD&A. Unless stated otherwise, all monetary figures discussed today are in Canadian dollars. Capital expenditures and production figures presented today are based on our working interest net to Greenfire, unless noted otherwise. Joining us on today's call are key members of the Greenfire leadership team, including Adam Waterous, Executive Chairman; Colin Germaniuk, President; Jonathan Kanderka, Chief Operating Officer. Upon conclusion of our prepared remarks, we'll open the floor to questions from analysts. I will now hand the call over to Colin.
Good morning, and thank you, everyone, for joining Greenfire's Q2 2025 Conference Call. On this morning's call, there are three topics I would like to discuss before opening the call up to questions from our analysts. First, I will provide an update on Greenfire's current year operations. Second, I will provide a progress update on our longer-term development plans. And third, I'll provide some brief background on Greenfire's new VP Finance, Travis Belak, whom we are very excited about. As previously discussed last quarter, 2025 has been a challenging year for Greenfire operationally, which to recap is due to three reasons. One, in February, one of our four boilers at the expansion asset unexpectedly had to be taken offline for repairs, which has reduced our production by approximately 1,500 to 2,300 barrels a day since that time. Two, also in February, it was brought to the company's attention that Greenfire's sulfur dioxide emissions may have risen above the maximum level permitted by the Alberta energy regulator.
And three, Greenfire has historically underinvested in new wells, which has resulted in most of the existing production today being relatively mature with relatively high decline rates. Over the past few months, Greenfire has made considerable progress addressing each of these challenges, which I would like to briefly touch on. Regarding the boiler outage, the boiler repair remains on schedule with full steam capacity available by year-end 2025. Regarding the sulfur emissions, Greenfire is currently procuring a sulfur removal unit to be installed at the expansion asset, which we expect to be operational by year-end 2025. And regarding the historical underinvestment in new well pairs, Greenfire has considerably advanced our inaugural SAGD pad, Pad 7, which is expected to start drilling in Q4 of this year. Finally, now that the Greenfire team has a better handle on the trajectory of current year operations, we are prepared to share our 2025 production and capital guidance.
In 2025, we expect to produce between 15,000 and 16,000 barrels a day of bitumen, and we expect to invest $130 million in capital expenditures. Greenfire's planned 2025 capital program includes the acceleration of approximately $35 million of Pad 7 capital from 2026 into 2025 with the intention of potentially achieving first steam on Pad 7 at an earlier date. I would now like to move on to the second topic, that being the advancement of our longer-term development plans. Over the past few months, the primary focus of our team has been on the development of Pad 7. Pad 7 is situated to the northeast of our expansion central processing facility and directly offsets existing production at Pad 6, giving us high confidence in the region's recoverable resource. The current plan is for the Pad 7 well pairs to include 13 well pairs at Pad 7 with lateral lengths ranging from 800 meters to 1,400 meters.
Drilling is expected to start in the fourth quarter of this year with first oil forecasted to be in Q4 2026. Furthermore, given the long cycle times associated with new SAGD pad development, Greenfire is also evaluating some shorter cycle drilling opportunities to be completed concurrently with Pad 7 in 2026, including the potential for infill wells at the expansion and redrill wells at the demo asset. Lastly, moving to the third topic. It was announced in this morning's news release that Greenfire has hired a new VP of Finance, Travis Belak, who will replace Greenfire's prior CFO and VP Finance and become the most senior person in charge of Greenfire's finance team. Travis was most recently the Corporate Controller at HWN Energy and brings approximately 15 years of experience in upstream oil and gas financial reporting, corporate planning, tax and treasury. Travis, together with the leadership of the Waterous Energy Fund team, leaves Greenfire in the hands of excellent financial stewards of capital.
And finally, I'd like to thank Tony Kraljic for his contributions to Greenfire. His leadership and efforts have left a lasting positive impact on the company, and we're grateful for the role he played in helping shape our path forward. This concludes our planned remarks for the Q2 conference call, and we'll now open it up to questions.
Questions and answers
(Operator provides instructions.) Our first question today will come from Jason Wangler of Imperial Capital.
I wanted to just ask, obviously, the production level at the demo asset really looked pretty strong. You mentioned there was some optimization, but I'm just curious if you could expand on kind of what you're seeing there? And is that something that can continue there and, as well, obviously, as you move to the expansion?
Yes. We drilled two wells earlier in Q1 that have been coming online and ramping up nicely. We're adding roughly 800 barrels each to really boost production there. And we're looking at more options at the demo and the expansion similar to these wells.
Okay. And maybe it goes to that question. You talked a few minutes ago about looking at some shorter cycle things at expansion as well as the drilling that you're going to be doing in the next quarter. How do you look at 2026? I know it's early, obviously, but do you think that the CapEx run rate of where you're looking this year is similar? Is it more? That's obviously a ways away, but just how do you guys look at what your thoughts are next year as you continue to get everything where you want to operationally?
This is Adam Waterous. I'll take that. We're not at a point yet where we can provide guidance for 2026. Maybe just to step back, sometimes it's easy to get lost in all the numbers. It's good to try to understand where the transition of the company is coming from. I'd put it more simply: much of the past operational decisions of the company came from a 'look, ma, no hands' approach. This is a company that, when the previous owners bought the JCOS asset, were very proud of the fact that they put no equity in the business, and it was entirely debt financed. That was treated like some kind of trick or accomplishment. Overleveraging the balance sheet resulted in many operational decisions which we are having to unwind. The first impact was a very highly capital-constrained business, and as a result only short-cycle wells were drilled, which generally had fast declines. The second problem was a lot of basic maintenance was not done, and most obviously there was not proper sulfur emissions infrastructure put in place.
That led to the deterioration of at least one boiler. It was like saying we don't need to put oil in the engine; we skipped the regular oil changes, and now the engine seized. The third thing that happened is the development plan was extremely ambitious with very long wells that went through multiple heights and turns with the thought we'd go super long wells and save money on a per-meter basis. These were effectively double-backflip, full-twist wells. What we have had to do is change all three of those things in how the business is being operated. Number one, we're going to be drilling the first well pairs that Greenfire has actually ever drilled. Number two, we're putting in sulfur removal units and repairing the boiler. And number three, Pad 7 is designed to be a much more conventional type of development pad with considerably less execution risk. All of that is in the context that the business still remains grossly overlevered.
The original bonds are still in place, and that causes a huge amount of interest expense and restrictions on how the business is operated and how much capital gets spent. I offer that background so it's clear why we can't yet provide 2026 guidance. Your question is reasonable about 2026, but we're just not in a position to provide specific guidance at this time.
No, the answer is a lot better than the question was. Maybe asked a different way just for our understanding: how much of this year is the unwinding of past decisions, and how much will be next year? Or are you predominantly done and then able to run the programs as you want in 2026? Is that a fair way to look at it?
I think it's fair to say we have unwound a lot of what happened, but we are just at the very beginning stages of executing the development plan. There's always an unwinding process and then a move-forward process. I would emphasize your question is reasonable about 2026, but we're not in a position to provide specific guidance at this time.
Ladies and gentlemen, at this time we will be concluding the question-and-answer session. I'd like to turn the conference back over to Mr. Robert Loebach for any closing remarks.
Thank you, operator. On behalf of Greenfire, we appreciate you joining us on our Q2 2025 results conference call. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.