PEYTO EXPLORATION & DEVELOPMENT CORP. $30.32 - Toronto symbol PEY

PEYTO EXPLORATION & DEVELOPMENT CORP. $30.32 (Toronto symbol PEY; Shares outstanding: 153.7 million; Market cap: $4.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.4%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 77,592 barrels of oil equivalent is 90% gas and 10% oil.

In the quarter ended September 30, 2014, Peyto’s cash flow rose 62.7%, to $1.09 a share from $0.67 a year ago. That’s because it raised its production by 37.7% and realized higher oil and gas prices.

The company is forecast to generate cash flow of $4.80 a share in 2015. That estimate will fall if oil prices stay low for some time, but Peyto’s high weighting in gas will largely offset lower oil prices. Peyto trades at 6.3 times the current forecast, which is reasonable in light of its strong growth prospects.

The stock yields 4.4%, and the company pays out just 28% of its cash flow as dividends, so its current dividend rate appears safe.

Peyto Exploration & Development Corp. is a buy.

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