PEYTO EXPLORATION & DEVELOPMENT CORP. $23.06 - Toronto symbol PEY

PEYTO EXPLORATION & DEVELOPMENT CORP. $23.06 (Toronto symbol PEY; Shares outstanding: 148.5 million; Market cap: $3.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.1%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Peyto’s average daily production of 46,033 barrels of oil equivalent is 89% gas and 11% oil.

In the three months ended September 30, 2012, the company’s cash flow was $0.54 a share, down 12.9% from $0.62 a share a year earlier. Lower gas prices offset a 26.5% rise in production.

The shares trade at 7.3 times Peyto’s forecast 2013 cash flow of $3.14 a share. The company’s long-term debt of $615 million is a low 18.1% of its $3.4-billion market cap.

Peyto’s monthly dividend of $0.06 a share yields 3.1% on an annualized basis. The company pays out just 23% of its cash flow as dividends, so it can easily afford to maintain that rate.

Peyto Exploration & Development Corp. is a buy.

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