Stonehorse finds profit momentum as Drumheller reshapes its portfolio

Profit returns as Canadian production takes the lead

Stonehorse Energy Limited (ASX:SHE) has returned to profit as its Canadian oil operations began to reshape the company’s earnings profile. Revenue rose to A$5.20 million for the year ended 30 June 2026, from A$3.46 million a year earlier, while profit after tax reached A$1.29 million compared with a prior-year loss of A$1.37 million.

The headline improvement was powered by Canada. Stonehorse’s Canadian working interests produced 100,441 BOE during the year, averaging 283 BOE per day. In the second half, revenue was 156% higher than the corresponding period a year earlier, the liquids ratio increased from 53% to 72%, and realised pricing rose from A$25.67 to A$63.96 per BOE. Two Drumheller wells brought online in August added approximately 225 BOE per day beyond the reported full-year average.

Canada generated A$3.94 million of revenue, more than three times the A$1.27 million contribution from the United States. The shift reflects Stonehorse’s participation in six successful Drumheller wells during the financial year, with two online after year-end, alongside the sale of its gas-weighted Caroline assets for gross proceeds of C$3.11 million. Those proceeds were directed towards accelerating the Drumheller development program.

US disposal leaves a simpler, more concentrated portfolio

The annual report also captures a significant change that occurred after the reporting date. On 2 September 2026, Stonehorse sold its US oil and gas interests to Brookside Energy for approximately US$1.114 million, comprising cash and 7.5 million Stonehorse shares held by Brookside. The transaction removes a mature US portfolio that produced approximately 53,872 BOE during FY2026, but it also leaves the company more dependent on its Canadian development strategy.

Stonehorse said soft North American natural gas prices had weighed on net operating revenue from the US assets. The Jewell well in Oklahoma remained the portfolio’s strongest US asset, contributing approximately 2,869 BOE per month to Stonehorse. The reported accounts recognised a A$243,310 impairment against the US producing assets, matching the difference between their 30 June carrying value and the subsequent sale consideration.

Cash flow and Drumheller funding remain the pressure points

Profit did not translate into operating cash generation. Net cash used in operating activities was A$475,274, compared with A$113,291 of operating cash inflow in FY2025. Receivables rose sharply to A$3.28 million from A$385,570, while cash and cash equivalents fell to A$3.84 million from A$5.28 million. Stonehorse invested A$7.13 million in producing assets during the year, funded in part by asset disposals and new borrowings.

The new funding is material for a company of this size. Stonehorse carried A$1.33 million in borrowings at year-end under a C$1.3 million promissory note facility bearing interest at 12% a year. The notes are repayable by the end of March 2029 and secured against the company’s interest in Drumheller #4. Stonehorse plans to participate in more Canadian wells through FY2027 and is negotiating potential multi-well opportunities, with a target investment decision in the second quarter of FY2027.

The accounts therefore present two competing signals. Production, oil weighting and reported earnings have improved, but operating cash flow remains negative and the portfolio is now concentrated in a Canadian drilling program that relies on commodity prices, well performance and access to capital. The company is also reviewing further opportunities in the Western Canadian Sedimentary Basin, although the report makes clear that none is guaranteed to proceed or deliver the expected outcomes.