Why Cavvy Energy caught our attention as an investment

Earlier in 2024, my friend Sasha and I were casually skimming through balance sheets of companies we thought might be interesting to invest in. One of the companies that stood out was Cavvy Energy Ltd.

At the time, the company was still called Pieridae Energy. In May 2025, it changed its name to Cavvy Energy.

A company cleaning up its past

Under its old structure, the company carried a heavy debt load. That made it fragile and limited its options. What appealed to us was that the new management team made debt reduction a clear priority.

In 2025 alone, the company paid back roughly CAD 18.6 million of debt. That may not sound like much at first, but for a company like this, it is an important step towards a healthy balance sheet. Less debt for the company means a lower risk, more flexibility, and more of the company’s cash flow staying inside the business.

Additional data shows:

  • Net debt declined, reducing leverage
  • Free cash flow was positive across multiple quarters
  • Liquidity remained adequate for operations
  • Share-based compensation stayed low relative to operating income

A hidden cash-flow lever: sulphur

One of the things we realised during the find of this company and an obvious detail that stood out: sulphur.

When natural gas is produced, sulphur is removed as part of the process. Until the end of 2025, Cavvy sells most of this sulphur under an old fixed-price contract at a very low price. Starting in 2026, that contract expires and the company will receive market prices instead.

Based on current production levels of approximately 1.1 kilotonnes per day, and with capacity to reach up to 1.3–1.4 kilotonnes, selling sulphur at market rates could generate a substantial increase in cash flow. Under reasonable sulphur price assumptions in 2026, this change could contribute roughly CAD 60–90 million in additional annual cash flow without increased production or incremental capital expenditures.

A stable base business

This also isn’t a small or early-stage business. In 2024, Cavvy generated about CAD 173.4 million in revenue. Through most of 2025, revenue increased to about CAD 204.31 million, which suggests the underlying business is stable while management focuses on reducing debt.

Operating expenses have remained controlled, with unit opex near C$17 per barrel of oil equivalent and maintenance capital expenditures modest relative to cash flow.

Why this matters for investors

What makes Cavvy interesting to us is the combination of factors coming together:

  • A business that was written off in the past
  • A management team focused on paying down debt
  • Improving financial stability
  • A potential cash-flow tailwind starting in 2026

With these numbers, we believe the risk is being reduced and the management is working hard towards rebuilding the health of this company.

Risks still exist

Of course, this is not a risk-free investment. Energy prices are cyclical, sulphur prices can fluctuate, and the company still carries debt. Progress may not be perfectly smooth. But overall, looking at the numbers, we have no doubt that this company can deliver a 4-5x return over the period of the next year(s).

Our takeaway

For us, Cavvy became interesting not because it promises explosive growth, but because it appears to be quietly fixing its problems. If management continues on this path and external conditions remain reasonable, the company could look very different a few years from now.

A company focused on strengthening its foundations deserves attention. For that reason, we believe CVVY Energy Ltd is a suitable holding going into 2026.