On Monday, Stifel Canada adjusted its share price target for Peyto Exploration & Development Corp. (PEY:CN) (OTC: PEYUF), lifting it to C$16.50 from the previous C$16.00. The firm continues to recommend a Buy rating for the stock. This revision follows Peyto's release of its fourth-quarter and full-year financial results, which were announced after the market closed on Thursday.
Peyto's fourth-quarter funds from operations (FFO) amounted to C$200 million, or C$1.05 per share, surpassing the consensus estimate of C$0.99 per share and Stifel Canada's own forecast of C$188 million, or C$0.98 per share. The company's year-end net debt stood at C$1,363 million, aligning with consensus expectations.
The company had previously disclosed key financial and operational details, including its 2023 capital expenditure plans amounting to C$413 million, fourth-quarter production figures, operating netback, year-end reserves, and an update on the 2024 guidance in its press release on February 15, as well as in recent monthly reports.
Stifel Canada's Core 2P Net Asset Value (NAV) estimate for Peyto has experienced a slight decrease and is now set at C$22.92 per diluted share, based on strip pricing. The firm has also modified its 2024 and 2025 FFO estimates, with an increase of 1.6% and 0.3%, respectively, due to adjustments in interest expenses.
The rationale behind the increased price target is attributed to a higher target multiple, now set at 10.2 times the 2025 estimated enterprise value to un-hedged free cash flow before interest, taxes, depreciation, and amortization (EV/unhedged FCFF), which implies a multiple of 5.3 times the 2025 estimated EV/unhedged debt-adjusted cash flow (DACF), using strip pricing as the reference.
Stifel Canada reaffirms its positive stance on Peyto, reflected in the maintained Buy rating and the uplifted stock price target.
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