G&MAt least two analysts raised their price targets on Peyto Exploration & Development Corp (PEY-T) after an earnings beat in the gas producer’s fourth quarter.
BMO raised its price target to C$16.50 from C$14 while Stifel raised its price target to C$16.50 from C$16. The average analyst price target is now C$16.14.
Cash flow of $1.05/share was above the consensus’ estimate of $0.99 on stronger-than-expected realized prices, partially offset by higher operating costs.
BMO analyst Randy Ollenberger, who has a “market perform” rating on the stock, noted that Peyto is maintaining its large hedge position that protects about 70 per cent and 55 per cent of its gas production in 2024 and 2025, respectively. “This should support the sustainability of the company’s dividend and allow for further debt repayment” even in a lower natural gas price environment, he said.
He believes investors are likely to avoid natural gas leveraged companies over the next several quarters due to the prospect of even weaker prices.
Looking further out, “despite the company remaining committed to a robust hedging program, we believe share performance could improve in 2025 as North American natural gas prices strengthen on the back of additional LNG capacity coming online, coupled with Peyto potentially realizing incremental value as it grows its recently acquired Repsol assets,” Mr. Ollenberger said.