Greenfire Resources Ltd. Annual Report - A Clearer Look for Investors

Considering an investment in Greenfire Resources Ltd.? This summary provides a clear, investor-focused overview of the company's performance, financial health, and future outlook, based on its latest annual report (Form 40-F) for the fiscal year ended December 31, 2025. We've translated the key details into plain English to help you assess if Greenfire aligns with your investment objectives.

The Basics: Who, What, Where?

• Company Name: Greenfire Resources Ltd. (including its operating company, Greenfire Resources Operating Corporation, and other subsidiaries).
• What they do: Greenfire is an oil sands producer focused on developing its long-life, stable thermal oil assets in the Athabasca region of Alberta, Canada. Its main goal is to efficiently grow production by leveraging its existing large resource base and infrastructure.
• Where they're from: Incorporated in Alberta, Canada, Greenfire is classified as a "foreign private issuer" by U.S. financial regulators. This status allows the company to follow certain Canadian corporate governance rules instead of all U.S. ones. Investors should note this may lead to differences in reporting frequency or specific disclosures compared to U.S. companies, as explained on Greenfire's website.
• Their Main Assets: Greenfire's key assets are the Hangingstone Facilities, located approximately 50 kilometers south of Fort McMurray, Alberta. These include two Steam-Assisted Gravity Drainage (SAGD) oil production facilities: the Expansion Asset (where Greenfire holds a 75% interest) and the Demo Asset (where it holds a 100% interest).
• Where they trade: Greenfire shares trade on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (TSX) under the ticker symbol GFR.
• How many shares are out there? As of December 31, 2025, 125,407,252 Common Shares were outstanding. This number is important as it helps determine the company's total market capitalization (share price multiplied by outstanding shares).
• Financial Reporting Standards: All financial figures in the report are in Canadian dollars (CAD). Greenfire also follows IFRS Accounting Standards, which are international rules for financial reporting.

What We Know About Their Operations & Governance:

• Financial Reporting: Greenfire filed its annual report, which includes its Audited Annual Financial Statements for both 2025 and 2024, and a Management's Discussion and Analysis (MD&A). These documents provide crucial insights into its financial performance.
• Internal Checks and Balances: Management confirmed that its "disclosure controls and procedures" (processes ensuring accurate and timely information reporting) were effective as of December 31, 2025. This indicates robust processes. Additionally, no major changes occurred in its internal financial controls during 2025.
• Audit Committee: An Audit Committee, comprising independent members including Brian Heald (a designated "financial expert"), helps oversee the company's financial reporting and the annual review of its oil reserves. A Reserves Committee also supports this oversight.
• Code of Ethics: Greenfire maintains a Code of Ethics for its directors, officers, and employees, available on its website. The company made no changes or granted any exceptions to this code in the past year, demonstrating consistent ethical standards.
• Auditors: Deloitte LLP, a well-known accounting firm, audited Greenfire's financial statements.
• Off-Balance Sheet Arrangements: Greenfire reported no significant off-balance sheet arrangements or hidden commitments that could materially impact its financial health, meaning fewer potential surprises for investors.
• Emerging Growth Company Status: Greenfire is classified as an "emerging growth company." This status grants it some flexibility in reporting requirements; for example, it does not need to include an independent auditor's report on its internal controls, a common requirement for larger companies. For investors, this generally means less extensive disclosure compared to fully mature public companies.
• Environmental Compliance: Greenfire successfully installed and commissioned sulphur removal facilities at its Expansion Asset in late 2025. These facilities are now fully operational, bringing the company back into compliance with regulatory limits for sulphur dioxide emissions. This represents a positive step for its environmental standing and reduces regulatory risk.

Who Owns Greenfire? (Ownership Update)

Waterous Energy Fund (WEF) is Greenfire's major shareholder. In 2024, WEF acquired a significant stake, owning 56.5% of the company's common shares by year-end. This trend continued in 2025, with WEF's ownership growing to approximately 72.0% of Greenfire's common shares by December 31, 2025. This increase primarily resulted from WEF's participation in the Rights Offering completed in December 2025, demonstrating its strong commitment and control over the company.

How Did They Make Money? (Income Statement Snapshot)

Here's how Greenfire's core business performed and what influenced its profitability:

• Oil Sales (Net of Royalties): Revenue from oil sales noticeably dropped from $790.9 million in 2024 to $584.4 million in 2025, a decrease of about 26%. This significant decline stemmed from a combination of factors:
  • Lower Production: Average daily bitumen production decreased from 19,292 barrels per day (bbls/d) in 2024 to 16,169 bbls/d in 2025, a drop of about 16%.
  • Lower Oil Prices: The average realized oil price also declined from $81.63 per barrel in 2024 to $73.47 per barrel in 2025.
• Risk Management Contracts: Greenfire uses financial tools like hedging contracts to mitigate significant swings in oil prices. In 2024, the company reported a loss of $27.5 million from these contracts. However, in 2025, it realized a significant gain of $42.6 million. This positive swing helped offset some of the drop in oil sales revenue, indicating successful hedging or favorable market movements for its positions.
• Total Revenue: Overall, total revenue (including risk management contracts) decreased from $763.5 million in 2024 to $627.0 million in 2025, an 18% drop.
• Gross Profit: This represents the money remaining after directly covering the costs of producing oil (e.g., royalties, operating expenses, and diluent). Gross profit decreased from $149.8 million in 2024 to $131.9 million in 2025.
• Operating Netback: This key metric measures the profitability of operations per barrel of oil produced, after accounting for royalties, operating costs, and transportation. Despite lower sales, operating netback increased from $32.49 per barrel in 2024 to $34.82 per barrel in 2025. This suggests Greenfire became more efficient at managing its direct production costs, which is a positive sign.
• Operating Expenses:
  • Diluent Expense: The cost of thinning heavy oil for pipeline transport decreased from $327.1 million in 2024 to $232.8 million in 2025, primarily reflecting lower production volumes.
  • Operating Expenses: Direct costs of running oil and gas operations also decreased from $152.9 million in 2024 to $129.0 million in 2025, again largely due to lower production.
  • Financing and Interest Costs: These costs increased from $61.5 million in 2024 to $77.6 million in 2025. This increase, despite significant debt repayment, was likely due to one-time refinancing costs and/or accrued interest on the debt before its full repayment.
  • Depletion and Depreciation: This accounting cost for using up oil reserves and equipment remained relatively stable, increasing slightly from $81.0 million to $83.6 million.
• Net Income (Profit): This is the bottom line. Despite positive swings in risk management and lower operating costs, overall profit took a hit.
  • Profit before taxes increased from $36.5 million in 2024 to $55.3 million in 2025, indicating improved operational profitability.
  • However, a significant factor was income tax. In 2024, Greenfire reported an income tax recovery of $84.9 million (meaning past tax losses or deferred tax assets boosted its profit). In contrast, in 2025, it incurred an income tax expense of $7.8 million. This massive swing in tax treatment, from a benefit to a cost, significantly impacted final profit.
  • Consequently, net income (profit) dropped from $121.4 million in 2024 to $47.5 million in 2025, a decrease of about 61%. Net income margin also decreased from 15.9% in 2024 to 7.6% in 2025.
• Profit Per Share: Basic earnings per share (EPS) declined from $1.76 in 2024 to $0.66 in 2025, reflecting the lower overall profit.

What About Their Financial Health? (Balance Sheet Snapshot)

The balance sheet details what the company owns (assets) and what it owes (liabilities). Key highlights include:

• Total Assets: Total assets grew slightly from $1.26 billion in 2024 to $1.29 billion in 2025, suggesting continued investment.
• Cash on Hand: Cash and cash equivalents decreased from $67.4 million in 2024 to $42.0 million in 2025.
• Property, Plant and Equipment: Property, plant, and equipment increased from $960.1 million to $990.1 million, reflecting capital investments.
• Working Capital: Working capital, a measure of short-term financial flexibility (current assets minus current liabilities), dramatically improved, swinging from a $191.6 million deficit in 2024 to a $53.4 million surplus in 2025. This represents a massive improvement in Greenfire's ability to cover short-term obligations.
• Total Liabilities (What They Owe): Greenfire significantly reduced its debt. Total liabilities plummeted from $436.0 million in 2024 to $118.6 million in 2025, a massive 73% reduction.
  • Long-Term Debt: Greenfire completely repaid its long-term debt, which decreased from $80.4 million in 2024 to $0 in 2025. The principal amount of its long-term debt decreased from $343.9 million in 2024 to $0 in 2025.
  • Current Portion of Long-Term Debt: Similarly, the current portion of long-term debt (due within a year) decreased from $248.5 million in 2024 to $0 in 2025. This marks a major improvement in financial stability, moving from a debt-to-equity ratio of approximately 0.40x in 2024 to virtually zero long-term debt in 2025.
• Shareholders' Equity: Shareholders' equity significantly increased from $821.4 million in 2024 to $1.17 billion in 2025. This increase primarily resulted from the $298.7 million raised through the Rights Offering's issuance of new shares.
• Liquidity and Overall Financial Position:
  • Undrawn Credit Facility: Greenfire significantly increased its available credit under its Senior Credit Facility, from $50.0 million in 2024 to $275.0 million in 2025, with none of it drawn.
  • Net Surplus (Debt): The company transitioned from $261.4 million in net debt in 2024 to a $49.7 million net surplus in 2025. This means Greenfire now holds more cash and available credit than debt.
  • Available Funding: Total available funding (cash plus undrawn credit) more than doubled, from $132.4 million in 2024 to $324.7 million in 2025. This demonstrates a much stronger financial position and improved flexibility.

Where Did the Money Go? (Cash Flow Statement Snapshot)

This statement shows how cash moved in and out of the company:

• Cash from Operations: Cash generated from day-to-day operations remained relatively stable, moving from $144.5 million in 2024 to $136.5 million in 2025.
• Financing Activities (How they manage debt and equity): Significant changes occurred in financing activities.
  • Debt Repayment: Greenfire made substantial debt repayments, totaling $329.3 million in 2025, compared to $84.3 million in 2024. This was a significant effort to strengthen its balance sheet and included the redemption of all its outstanding 12.00% senior secured notes due in 2028.
  • Issuance of New Shares: To help fund this debt repayment, Greenfire raised $298.7 million in 2025 by issuing new common shares through a Rights Offering, which allowed existing shareholders to purchase additional shares. No such issuance occurred in 2024.
  • Overall, despite the substantial debt repayment, cash used in financing activities was less in 2025 ($58.2 million) than in 2024 ($95.4 million) due to the new capital from share issuance.
• Investing Activities (How they spend on growth):
  • Capital Spending: Capital spending on property, plant, and equipment (its oil and gas assets) increased from $91.8 million in 2024 to $111.8 million in 2025. This suggests Greenfire is investing more in its operations and future growth, likely focused on drilling and infrastructure improvements.
• Overall Cash Change: After these movements, the cash balance decreased by $25.4 million in 2025, ending the year with $42.0 million.

What They're Planning & What's Next (Future Outlook and Strategy)

Greenfire's strategic goal is to maximize long-term shareholder value by investing in proven techniques to increase production at its Hangingstone Facilities while controlling operating costs. This involves optimizing SAGD operations and expanding its resource base. Key developments and future plans include:

• Refinancing Success: In December 2025, Greenfire successfully completed a major refinancing. This involved issuing 55.1 million new shares through a Rights Offering to raise $298.7 million, which Greenfire then used to repay all its outstanding 12.00% senior secured notes due in 2028. This significantly strengthened its financial position by eliminating a large portion of high-interest debt and boosting available credit, providing greater financial flexibility for future investments.
• Investing in Growth (Drilling Program):
  • In late 2025, Greenfire began drilling at Pad 7 at its Expansion Asset (comprising 14 well pairs). Production from this pad is anticipated to begin in late 2026.
  • For 2026, Greenfire plans further drilling, including re-drilling a well on Pad 6 (expected online late 2026) and adding three new well pairs to Pad 5 (expected online in 2027).
  • Looking further ahead, following promising exploration results in 2026, Greenfire anticipates commencing drilling at Pad 8 (with eight well pairs) in early 2027.
  • At the Demo Asset, Greenfire re-drilled two production wells in late 2025 that had been shut down since before 2018. These wells are expected to resume production in the first half of 2026.
• Production Challenges and Recovery:
  • While the Demo Asset has performed better than expected in early 2026, production at the Expansion Asset has been slightly lower than planned. This was mainly due to unexpected downtime from a highly productive well, which impacted production by approximately 1,000 bbls/d.
  • This well has since been re-drilled and is expected to be back online in March 2026.
  • The refurbishment of a second steam generator at the Expansion Asset was successfully completed at the end of 2025, restoring full steam capacity. Greenfire is now working to optimize operations and restore production to its full potential.
• 2026 Production Outlook: Due to the recent unplanned well downtime, Greenfire has slightly revised its production forecast for 2026. It now expects average annual production to be between 13,500 and 15,500 barrels per day. This is lower than its previous estimate of 15,500 to 16,500 bbls/d, and also below its 2025 actual production of 16,169 bbls/d.
• Capital Spending for 2026: Greenfire plans to spend $180.0 million on capital expenditures in 2026, consistent with its prior guidance. This demonstrates a commitment to its investment plans despite the revised production outlook, indicating a focus on long-term growth.

Competitive Position

Greenfire Resources operates within the highly capital-intensive and competitive Athabasca oil sands region of Alberta, Canada. Its competitive position primarily derives from:

• Established, Long-Life Assets: Greenfire's focus on its Hangingstone Facilities, utilizing Steam-Assisted Gravity Drainage (SAGD) technology, provides access to a large, long-life resource base. This allows for sustained production over many years, leveraging existing infrastructure.
• Operational Efficiency: Greenfire emphasizes efficient production and cost management. The increase in operating netback in 2025, despite lower production and prices, suggests a focus on optimizing direct production costs, which is crucial in the oil sands sector.
• Leveraging Existing Infrastructure: Its strategy to grow production by optimizing and expanding within its existing asset base (e.g., new pads at Hangingstone) aims to reduce the capital intensity typically associated with new oil sands developments, potentially offering a cost advantage over greenfield projects.
• Market Niche: As a pure-play thermal oil sands producer, Greenfire competes with other major and intermediate producers in the region for capital, services, and market access for its bitumen production. The company's ability to manage diluent costs and secure pipeline capacity is key to its competitiveness.

Important Notes on Oil & Gas Reporting (Especially for U.S. Investors):

Since Greenfire is an oil and gas company, how it reports its reserves (the estimated amount of oil and gas it expects to recover) is crucial. Key differences include:

• Canadian vs. U.S. Standards: Greenfire reports its oil and gas reserves using Canadian disclosure standards (NI 51-101). These differ from U.S. SEC standards.
  • Definitions of Reserves: Canadian definitions for "proved" or "probable" reserves may differ from U.S. SEC standards.
  • Gross vs. Net Volumes: Canadian reports often present "gross" volumes, representing the total oil/gas before royalty deductions (payments to land owners). U.S. companies typically report "net" volumes, which are after royalties. Therefore, Greenfire's reported volumes might appear higher than a U.S. company's for the same amount of oil in the ground.
  • Pricing for Future Value: Canada uses "forecast prices and escalating costs" to estimate future reserve values. The U.S. SEC typically requires a historical average of prices over the past year.
• What this means for you: When comparing Greenfire to U.S. oil and gas companies, be aware that reserve numbers and related valuations may not be directly comparable due to these differing reporting rules.

What Could Go Wrong? (Risks to Consider)

Greenfire also highlighted several factors that could impact its business and your investment. These are called "forward-looking statements" because they relate to future events, and outcomes don't always align with expectations. Here are some of the main risks identified, tailored to its operations:

• Oil and Gas Prices: Oil and gas prices are highly volatile, directly impacting Greenfire's profitability. Changes in global demand or supply, or decisions by major oil-producing groups like OPEC, can significantly influence prices. While Greenfire uses risk management contracts, these do not eliminate all price exposure.
• Global Economy & Geopolitics: Global economic factors such as inflation, interest rate hikes, geopolitical conflicts (e.g., in Eastern Europe or the Middle East), or trade disputes can weaken the global economy, thereby affecting oil and gas demand.
• Operating Problems: Unexpected issues with SAGD equipment or a decline in well productivity (such as the recent unplanned downtime at the Expansion Asset) could negatively impact Greenfire's profitability. The complex nature of oil sands operations carries inherent risks.
• Regulatory and Environmental Changes: Changes in government regulations concerning taxes, environmental protection (including climate change regulations and carbon pricing), or royalty payments could increase costs or limit operations. While Greenfire has addressed sulphur emissions, other regulations could still affect the company.
• Infrastructure: Greenfire relies on third-party pipelines and facilities to transport its heavy oil to market. Disruptions or unavailability of these facilities could impact business operations and realized prices.
• Concentration of Assets: Operations are primarily concentrated at the Hangingstone Facilities. Any significant issue at these assets could disproportionately impact the company.
• Competition: Greenfire competes with other companies for capital, new oil and gas lands, services, and skilled workers, which can drive up costs.
• Funding: While recent refinancing significantly improved Greenfire's funding situation, the ability to raise capital for future large-scale projects and meet financial obligations remains a general risk for any capital-intensive company.

Greenfire's 2025 performance presents a mixed picture: a significant drop in net profit, driven by lower production, oil prices, and a swing in tax treatment, was offset by a dramatic improvement in financial health through massive debt reduction and increased liquidity. Its strategic focus on drilling and optimizing existing assets, supported by a stronger balance sheet, positions the company for future growth, although the revised 2026 production outlook suggests some near-term operational hurdles.