McElvaine Value Fund on PrairieSky Royalty Ltd.
Thesis
PrairieSky owns fee-simple mineral rights across a large portion of Western Canada and receives royalties when third parties develop resources on its land. The model requires no capital expenditure or operating expenditure from PrairieSky and leaves it without direct environmental liability from operating the wells. The business produced record royalty volumes during 2026 while reducing net debt by approximately $90 million to $187 million. Management renewed its share repurchase authorization and maintained the quarterly dividend at $0.265. McElvaine views the underlying business as improved, although a roughly 50% share-price increase has materially reduced the valuation discount that originally made the opportunity more attractive.
“Record royalty production and net debt cut by about $90 million to $187 million.”
Key risks
- The shares have risen roughly 50% and are near an all-time high, meaning the valuation discount has narrowed.
- Royalty revenue remains exposed to commodity prices and drilling activity by third-party operators.