Permian Resources (PR) Valuation Update - May 10

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dan_s
Posts: 34805
Joined: Fri Apr 23, 2010 8:22 am

Permian Resources (PR) Valuation Update - May 10

Post by dan_s »

I have updated my forecast/valuation model for PR. It will be posted to the EPG website later today.

PR was trading at $9.56 at the time this was posted.

My valuation increases by $0.75 to $16.25/share.

Three energy sector analysts submitted updated price targets to TipRanks late yesterday:
> Gabriele Sorbara at Siebert Williams Shank & Co rates PR a BUY with a price target of $17.00
> Mark Lear at Piper Sandler rates PR a BUY with a price target of $16.00
> Gabriel Daoud TD Cowen rates PR a BUY with a price target of $15.00

PR's first quarter production (153,822 Boepd) was a bit lower than my forecast, but the Company confirmed their full-year production guidance mid-point of 161,500 Boepd. I do expect their production growth to accelerate in 2H 2023, thanks in part to the strategic leasehold trade they announced yesterday. Keep in mind that winter weather does have an impact on oil & gas production in West Texas.

They are also buying back stock faster than I expected, which could generate better per share results this year and in 2024 than my model.

PR is on-track to generate ~$2 billion of operating cash flow this year and over $500 million of free cash flow.

PR is a recent addition to the Sweet 16. It was created by the merger of Colgate Energy Partners III (a private company) into Centennial Resources Development (CDEV) that closed 9-1-2022. It has a very strong balance sheet and a lot of high-quality "running room" in the Delaware Basin. Each quarter of strong results will increase the confidence that I have in my forecast model.

I highly recommend that each of you take the time to review the new slide deck that was posted to https://permianres.com/investor-relations/news-events/ yesterday. This is a mid-cap that has a lot of upside for us.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34805
Joined: Fri Apr 23, 2010 8:22 am

Re: Permian Resources (PR) Valuation Update - May 10

Post by dan_s »

Reminder: When comparing a companies' reported revenues to my forecast models, keep in mind that my forecast for oil & gas revenues includes the impact of their hedges on realized commodity prices. I put the impact of hedges in a table at the bottom of each forecast model. Public companies "reported" oil & gas revenues don't include cash settlement on hedges, which are broken out low in the Income Statement. GAAP rules for hedges can be quite confusing, so just keep in mind that during a period of declining commodity prices the gains on hedges goes up.

PR's realized oil & gas revenues in Q1 included cash settlements on their hedges during the quarter of $39,735,000 million.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34805
Joined: Fri Apr 23, 2010 8:22 am

Re: Permian Resources (PR) Valuation Update - May 10

Post by dan_s »

Note received this morning from Neal Dingmann at Truist Financial.

Permian Resources Corporation (PR, $9.48, Buy) - On Track for Solid Production Growth Driving Increasing Shareholder Return

We continue to forecast production to grow smartly well into 2024 after slightly sequentially lower 1Q23 production driven by less completions than we expected. Further, the company paid its first variable dividend to go along with its base dividend and prior share buyback. We were surprised by investors relatively negative reactions to the 1Q23 release given PR delivered the operational and financial results we expected.
We are increasing our price target to $18 from $17. - Neal Dingmann
Dan Steffens
Energy Prospectus Group
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