RE:CIBC Increased PEY target to $3.00i use cibc. their latest report is june 30 with target @ $ 2.50. i dont see it posted on the bullboard so here it is....
PEY-TSX, Sector: Energy Current Price (6/29/20): C$1.81 Price Target (12-18 mos.): C$2.50
June 29, 2020 Flash Research PEYTO EXPLORATION & DEVELOPMENT CORP. Q2/20 Ops. Update: Liquidity Pieces Falling Into Place Peyto announced that it has received an extension of its credit facility, along with relief on its key financial covenants, albeit with slightly higher interest expense than before. Management has alluded to a likely extension in recent communication with investors, so the amendments announced today are largely as expected. With more than $200MM of available capacity on the revised facility, Peyto has plenty of flexibility to execute its capital program over the next two years, but will likely require higher commodity prices to generate material production growth, deleverage, or eventually provide any appreciable return of capital to shareholders. As a result, we reiterate our Neutral rating for the time being. Credit Facility Renewal/Covenant Relief: PEY has revised its current credit and note purchase agreements to reduce the size of its extendible revolving credit facility from $1.3B to $950MM and to be secured by a floating debenture on assets. Alongside this change, PEY was granted relief from prior financial covenants for the following: senior debt from 3:5:1 to 5:25:1 and total debt from 4:1 to 5:75:1. Additional changes included in the credit facility include the implementation of a stamping fee of between 200-600 basis points on Canadian dollar BA and U.S. dollar LIBOR borrowings, the addition of a standby fee between 50-150 basis points on undrawn amounts, and an extension of the term date to October 13, 2022. Operations Ahead Of Expectations: Despite an extremely damp and cold environment in the Edson area this spring, PEY started Q2 off strong with expectations of drilling 29 gross wells (27.5 net) in the first half of the quarter alone. This surge in new drilling early in the quarter has added around 65 mmcf/d of natural gas and 1,700 Bbl/d of natural gas liquids, decreasing drilling costs per meter and completion costs per stage in Q2/20 by an average of 10% compared to Q1/20.
Cost Savings Contribute To Strategic Three-year Plan: At the halfway point of the year, PEY’s 2020 capital program is anticipated to fall between $200MM - $250MM (unchanged), with 40-60 total wells drilled and completed. The remainder of the capital program is expected to expand natural gas gathering and processing, along with seismic acquisition. All additional cost savings from current production levels will be put towards increasing production into 2021. Looking out further, with improving production from PEY’s reserves, and a capital budget of $180MM for 2021 and $165MM for 2022, we see PEY as having ample flexibility to layer in growth as part of its three-year plan, provided commodity pricing remains supportive. PEY’s strategic three-year plan looks to weather the uncertainty of any volatility within commodity prices that may occur over the near term by providing opportunities with tight cost management and thoughtful growth.