Post by
perplexed01 on Mar 08, 2024 12:25pm
cibc analyst: target C$16 outperform down from $18 nov 8
Q4/23 Results: Steady Update In Line With Expectations
Our Conclusion
Cash flow was in line with Street expectations on pre-released production and capital spending. The company left its capital spending plans unchanged and continues to lean towards the low end of its spending guidance for 2024, but left the door open for flexibility depending on commodity prices. We see Peyto’s dividend and capital program as being well protected by its hedge book through 2024, and believe that its hedging strategy should drive outperformance versus peers through a weaker commodity price environment with contango strip pricing. The stock is trading in line with the gas-weighted peer average at 5.6x 2024E EV/DACF on the CIBC price deck.
Key Points
Cash flow in line with expectations on pre-released production and capital spending: Cash flow of $1.00/sh was above our estimate of $0.95/sh and ahead of Street at $0.99/sh. Natural gas realizations were $3.87/Mcf versus our estimate of $3.76/Mcf. Production volumes in Q4/23 totaled 120 MBoe/d and capital spending came in at $115MM, which was previously announced with Peyto’s reserves update.
Capital spending plans unchanged with a bias towards the low end of guidance range: We are estimating $475MM in capital spending for 2024 at this juncture, versus Street at $470MM. Capital spending guidance was maintained at $450MM to $500MM; however, management indicated its capital program has been designed with flexibility in H2/24 to adjust to changing commodity pricing. If greater price weakness ensues, we would not be surprised to see the company look to moderate spending plans later in 2024.
Hedge protection in 2024 likely to be a material asset: Peyto has 459 MMcf/d (~70%) of its natural gas production hedged at $3.93/Mcf in 2024, which sits well above the current forward strip for AECO at ~$2/Mcf. Management is also expected to supply gas to the 900 MWh Cascade power plant upon full operation, which is expected in Q2/24.
Current activity focused on the Greater Sundance area and the recently acquired Repsol lands: Since the beginning of the year, Peyto has drilled 12 wells, completed 10, and brought nine wells on production. Management indicated that three of four wells are focused on the acquired lands and facilities in Greater Sundance.
Price Target Calculation
Our 12- to 18-month price target of $16.00 is based on a target 2024E EV/DACF multiple of 5.9x on our CIBC base commodity price forecasts. We estimate net debt of $1,731MM in 2024. Our price target represents 0.6x our risked NAV on the CIBC base commodity price forecast.
Comment by
stockmarket1 on Mar 08, 2024 12:49pm
CIBC 16 to 18 month target price is really not too far off from where we currenty are-- $14.80. We're entering the weekend so, I think we'll get a better direction where Peyto will trade in coming weeks. I'm still expecting this to pull back at some point. I thought we'd be above $15 by now but, nope!! Might be a signal that the stock is getting a bit tired.