Phil Hodge, founder, president and CEO of Pine Cliff Energy, talks to The Energy Year about the company’s near-term drilling plans and how the rise of LNG and data centres is reshaping gas markets in Western Canada.
Pine Cliff Energy is an oil and gas E&P company focused on natural-gas-weighted, low-decline assets in Western Canada.
- Rising LNG demand, data centres and industrial gas consumption are improving sentiment around Western Canadian natural gas prices.
- LNG Canada is changing regional gas dynamics by pulling Canadian gas westward and creating new demand for supply that would otherwise serve domestic or US export markets.
- Canada has a logistical advantage in Asian LNG markets because its west coast export routes avoid major maritime choke points and offer shorter sailing times than the US Gulf.
Your most recent well, in Caroline, Alberta, came into production in February 2026. What are you planning next in this area?
Pine Cliff’s drilling inventory has never been as large as it is today. We accumulated it through multiple transactions over the past 10 years, including our 2015 acquisition from ConocoPhillips and the Glauconite assets we picked up in the Caroline area, in Central Alberta, in late 2023.
We held the Caroline assets for more than two years before we drilled our first well, which came on line in February 2026. We waited to drill until natural gas prices, particularly at the AECO Hub, improved. Today, due to the rise of LNG, data centres and other industrial demand, we are again bullish on natural gas prices in Western Canada for late 2026 and in 2027.
We have identified approximately 50 Glauconite gross drilling locations in the Caroline area, 22 of which are booked in our independent engineer’s reserve report. The wells cost about CAD 9 million [USD 6.5 million] to drill, complete and tie-in, but we expect them to be significant producers that will justify those investments.
Our first Caroline well continues to perform over 1,100 boepd despite having been producing for several months. At current forecasted prices, it will pay out in less than a year. Pine Cliff currently produces approximately 20,000 boepd and represents more than 5% of our corporate production. We are making plans to drill another Glauconite well in the fall or winter of 2026. Our longer-term drilling plans include two or three Glauconite wells per year. That rate of drilling would give Pine Cliff a slight growth wedge while replacing our low production decline.
How is Canada’s gas landscape evolving, and how is that affecting your operations?
Global gas consumption is rising, and Canada has an opportunity to secure a role as a major supplier. Today, approximately 80% of Pine Cliff’s production is natural gas, so the growth in natural gas demand is very important to us. In the near term, most new Canadian demand will come from the LNG Canada export project, which commenced sales in July 2025 and expects to run at full capacity starting in the summer of 2026.
Phase 1 of that project has a peak capacity of 56.6 mcm (2 bcf) per day, which is more than 10% of Canada’s production. We expect a second phase to be announced in 2026 that will double capacity. LNG Canada’s pipeline feeder system was built for 142 mcm (5 bcf) per day, so they would not need to build a new pipeline to supply two phases. I doubt Pine Cliff’s gas will be liquefied, but gas that competes with our production will be, and our production will help fill the gap in domestic supply and pipeline exports to the US.
Canada is a secure source of energy for the world. Our exports do not face choke points such as the Strait of Hormuz, the Panama Canal or the Malacca Strait. We can ship LNG to Asian markets in 10 days, compared to 24 days from the US Gulf. Natural gas in Canada has begun to flow west instead of east, which is completely new for our industry.
What is your value proposition to potential investors in Pine Cliff Energy?
Our model is built around free cashflow and returning capital to shareholders. When considering assets to buy, we don’t simply look at the cashflow they can generate, because if we must spend it all to hold production flat, there is nothing left for shareholders. AIMCo, which manages about CAD 180 billion [USD 130.8 billion], owns more than 10% of Pine Cliff. They understand our focus on free cashflow and returning capital. Pine Cliff management are significant owners, so we are well aligned with our shareholders.
We are proud that we started paying dividends in June 2022, and we have paid more than CAD 105 million [USD 73.8 million] to our shareholders to date. Few companies of our size have paid more than one-third of their market cap in dividends over the past three and a half years.
An important part of our business model is our low production decline rate. The average natural gas company in Canada has a decline rate of about 32%, whereas ours is under 10%. This allowed us to pause drilling for two years until we saw an improvement in commodity prices.
Are data centres already having a significant impact on your business?
We are in discussions with multiple groups to expand power generation and data centres on multiple sites owned by Pine Cliff. In January 2025, we announced a 25-year deal to supply gas to a private data centre developer in Alberta.
The Province of Alberta has declared that it wants to attract CAD 100 billion [USD 72.6 billion] in data centre investments, but the government is advising developers they shouldn’t expect to take all their power from the grid. Therefore, the trend is towards developing behind-the-grid distributed generation. These types of buyers are willing to pay a premium over the local natural gas market price for secure energy from geographically advantageous sites, and in these arrangements, Pine Cliff has the added advantage of no longer needing to pay transportation costs to remove the gas from the site.
Our natural gas also does not need to be purified or cleaned – it can go straight into turbines or reciprocating engines. The first data centre deal we announced represents about 5% of our current production, but it is conceivable that up to 50% of our gas could eventually go into these facilities. Dry gas assets with low decline rates that provide predictable production for decades to come are attractive to data centre operators.