PEYTO EXPLORATION & DEVELOPMENT CORP. $31.51 (Toronto symbol PEY; Shares outstanding: 148.5 million; Market cap: $4.7 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.1%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 56,343 barrels of oil equivalent is 89% gas and 11% oil.
In the quarter ended September 30, 2013, Peyto’s cash flow rose 24.1%, to $0.67 a share from $0.54 a year earlier. That’s because Peyto raised its production by 22.4%. Gas prices also gained 16.0%, to an average of $2.97 per thousand cubic feet from $2.56, while oil prices rose 17.8%, to $89.46 a barrel from $75.88.
The company has started up three gas plants since the quarter ended. That has let it activate 25 new wells, pushing up its production from 60,000 barrels a day to 70,000.
In 2014, Peyto plans to spend $575 million to $625 million on exploration and development. That will let it drill 110 to 125 wells and finish 2014 with output of 78,500 to 81,500 barrels of oil equivalent a day. To put that in context, Peyto will likely spend $565 million to drill 99 wells in 2013.
The stock trades at 7.7 times Peyto’s forecast 2014 cash flow of $4.08 a share. The company’s long-term debt of $780 million is a low 16.6% of its $4.7-billion market cap.
The stock yields 3.1%. Peyto pays out just 30% of its cash flow as dividends, so it can easily afford to maintain its current rate.
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