Permian Resources (PR) Valuation Update - May 8

[dan_s]

At the time of this post PR was trading at $17.07.

I have updated my forecast/valuation model for PR based on their solid production growth of 34,353 Boepd from Q4 to Q1, primarily due to the Earthstone Acquisition assets that are now fully integrated into PR. Well results continue to exceed expectations. The Company increased full year production guidance to 310,000 to 330,000 Boepd, which is the primary reason for my $1 stock valuation increase to $23.50/share. < Based on 5.5 X annualized operating cash flow per share. PR continues to bolt-on new acquisitions to fill in gaps in their leasehold, which I expect to push actual production up to the high end of their guidance.

My forecast is based on production of 322,000 Boepd in 2024 and 340,000 Boepd in 2025.

PR is on pace to generate ~$1.5 billion of free cash flow this year. 50% of free cash flow will be returned to shareholders via fixed + variable dividends (just $0.20/quarter this year) and stock buybacks. Most of the FCF returned to shareholders this year will be in the form of stock buybacks. Based on my forecast, outstanding stock should be declining by over 2 million shares per quarter.

The Company's production mix should be ~47.5% crude oil, which should generate ~84% of 2024 revenues. Based on my forecast, PR's realized natural gas prices, including cash settlements on their hedges, will only be ~$1.40/mcf this year. Obviously, a rebound in natural gas prices in 2025 would be a nice revenue boost. PR's natural gas production should exceed 600,000 mcf per day next year.

PR has incredibly valuable leasehold in the Delaware Basin. A Company with this much "Running Room" deserves to trade at a higher multiple. The current share price is just 3.7X my 2024 operating CFPS forecast. At that price PR is a "Screaming Takeover Target".

After this morning's Q1 results conference call four highly respected energy sector analysts submitted updated price targets to TipRanks.
All four of them rate the stock a BUY:
> William Janela at Mizuho Securities price target is $21
>Gabriele Sorbara at Siebert Williams Shank & Co price target is $22
> Mark Lear at Piper Sandler price target is $23
> Subash Chandra at Benchmark price target is $17 < This looks like an error because it was Mr. Chandra's previous price target. I've seen TipRanks forget to update price target before.

Bottomline: PR is an Aggressive Growth company with a lot more upside for us.

[Cliff_N]

Dan, I would have expected a 6% increase in SP after the ER, instead PR got beat down. Came back a lot but finished in down 1.3%. Very frustrating to see this sort of manipulation. Thoughts?