Centennial Resource Dev (CDEV) Valuation Update - Aug 8

[dan_s]

At the time of this post CDEV was trading at $6.51.

TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for CDEV. The average price target among the analysts is $10.11. The 8 price targets range from $7 to $13. The most recent update was on 8/4/2022 from Gabriele Sorbara at Siebert Williams Shank & Co. He reiterated the firm's Buy rating on Centennial Resource Development (CDEV), with a price target of $12.00. Piper Sandler increased their price target on 8/2/2022 to $11.00."

I have updated my forecast/valuation model for CDEV for their outstanding Q2 results, but I am keeping my current valuation at $12.00.

Why?
> Centennial announced a "Merger of Equals" with Colgate on May 19, 2022 that is now set to close on August 30, 2022.
> Centennial's Q2 production of 70,240 Boepd beat my forecast.
> If the Company's post-merger production is 140,000 Boepd, my valuation will be going up. Their proforma production for Q4 is 145,000 Boepd.
> There is significant upside because I am only valuing the stock at 4X annualized operating cash flow per share.
> If the merger closes in Q3 and their detailed guidance for Q4 confirms my forecast assumptions, a price target over $15.00 is reasonable.