Permian Resources (PR) Update - Jan 18

[dan_s]

PR is trading at $12.88 this morning.

TipRanks: "In the last 3 months, 12 ranked analysts set 12-month price targets for PR. The average price target among the analysts is $17.17."

Permian Resources closed the merger with Earthstone Energy (ESTE) on November 1st, so Q4 will include 2 months of Earthstone production.
> PR enters 2024 with ~310,000 Boepd of production (~47.5% crude oil, ~23% NGLs).
> Five of the best energy sector analysts have updated and submitted new forecast / price targets to TipRanks in January. Their Price Targets range from $15 to $22. Neal Dingmann at Truist Financial raised his price target by $2 to $22.

TipRanks' consensus forecast for Q4 2023 is: Revenues of $1.1 billion, $0.37 EPS, $1.04 operating cash flow per share.

TipRanks' consensus forecast for Year 2024 is: Revenues of $5.1 billion, $1.65 EPS, $4.26 operating cash flow per share. Based on my forecast, the Company's free cash flow should exceed $1.1 billion in 2024.

I expect PR to report higher Q4 EPS than the TipRanks' forecast due to a big mark-to-market gain on their hedges. Adjusted Net Income (not including the MTM gain on hedges) should be very close to the TipRanks EPS forecast.

My current valuation is $19.50, based on 4.5 X annualized operating cash flow for 2023 to 2025.

I'm eager to see the Company's detailed guidance for 2024. If it confirms my 2024 forecast assumptions, a higher valuation multiple should be justified because this company holds some extremely valuable "Running Room" in the Delaware Basin.