Peyto Exploration's next monthly dividend will be 11c and $1.32/year or a 9.8% yield. I've seen comparisons to $GXE.TO & $CJ.TO div, concerns on sustainability and concerns due to recent AECO/HH price drop. This report from TD shows it is sustainable.
1/x
#COM #OOTT $PEY $PEY.TO
Netbacks and production rowing y/y
2/x
-Currently trading @~2/3 of NAV
-EV/DACF trading near eight year low
-2P Reserve Life Index (RLI) of 23.5 years based on 105k boe/d, 2022 exit production (before addition of two acquisitions made in 2022)
3/x
2023 EV/DACF was tied for lowest valuation of gassy and oily peers at 2.9, tied with $SDE and $CPG
($80 $WTI and $3.65 AECO)
4/x
2022 and 2023 sensitivities $30-120 WTI vs $1-7 HH
CFPS, CF, FCF after CAPEX and dividends, available credit facility, net debt to cashflow, net debt (net cash)
5/x
Looking at unallocated FCF after dividends ($1.32/yr/sh @ 9.8% yield). $PEY can afford capex AND to dividend at approximately:
$3.5 HH & $30 WTI
$3.0 HH & $40 WTI
$2.0 HH & $50 WTI
$1.0 HH & $65 WTI
At current pricing, excess FCF could reduce debt by well over $200mm
6/x
FFO increasing on lower WTI and HH pricing in 2023 and 2024 due to less hedging losses =higher realized pricing and increased production
19% FCF yield @ $80WTI, $3.65 HH
7/x
Highly hedged production through summer 2023. Hedgebook keeps improving as time goes on. While hedging limits upside, it protects downside (and the dividend)
8/x
peyto.com/Files/Operatio…
Expected realized pricing by quarter @ $5 HH, $4 AECO, inclusive of current hedging. See how fixed price volumes steadily decrease in the favor of basis deals. Direct connection to Cascade Power will diversify pricing exposure to AB power pool
9/x
While the hedging has limited upside, due to being such a low cost operator, it somewhat compensates for lack of upside and ability to maintain profitability.
see latest presentation form Jan 13 2023
10/x
peyto.com/Files/Presenta…
Valuing the company another way, using replacement values. The company owns significant infrastructure that would be very costly to buildout/replace.
11/x
Declining decline rate (28%) and and continued growth potential
12/x
low cost for its term debt as well. will prioritize paying off revolving debt first
13/x
Thanks for getting it this far, hopefully you understand this company a little better.
During high HH prices I wasn't a fan of the poor hedging. However, with the recent volatility and huge dividend increase, I have made $PEY.TO a significant holding in my portfolio.
14/x
This is a long thread that also goes into recent company presentation and hedge book. See the whole thing here threadreaderapp.com/thread/1614493…
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