Topics Energy Stocks

Peyto Exploration & Development Corp. $36.36 - Toronto symbol PEY

PEYTO EXPLORATION & DEVELOPMENT CORP. $36.36 (Toronto symbol PEY; Shares outstanding: 164.6 million; Market cap: $6.0 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.6%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 101,546 barrels of oil equivalent is 93% gas and 7% oil.

In the three months ended March 31, 2016, Peyto’s cash flow fell 6.3%, to $0.88 a share from $0.94 a year ago. It raised its production by 24.5%, but that was offset by lower oil and gas prices. Its realized oil price fell 9.3% year over year, and natural gas prices fell 22.9%.

On March 31, 2016, long-term debt stood at $1.1 billion, or a low 18.3% of market cap. To lower its debt even further, Peyto issued an additional 5.5 million shares in May 2016 to raise $172.5 million.

The company plans to spend between $500 million and $550 million on exploration and development this year. It spent $594 million in 2015.

The stock trades at 10.3 times the forecast 2016 cash flow per share of $3.54. That’s high, but it’s not unreasonable for a company with Peyto’s long-term growth potential. The shares yield 3.6%.

As well, its low debt will let it quickly raise funds to accelerate drilling when oil and gas move higher.

Peyto Exploration & Development is a buy.

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