EC - Parex Resources: Dirt-Cheap Oil Producer Amidst Political Fears
2024-03-12 09:45:41 ET
Summary
- Parex is significantly undervalued at 1.96x EV/EBITDA due to concerns about political risks.
- Parex is a stellar business with great capital allocation at a 23.5% ROCE and top EBITDA margins at 68%.
- With a great track record of debtless growth, Parex continues to capitalize on growth opportunities.
- With a 7.15% dividend yield and plentiful buybacks decreasing outstanding shares with 35% over five years, Parex has rewarded shareholders immensely.
- Temporary headwinds like workover, a stronger Colombian peso and protests contributed to excessive downwards pressure for the stock.
While recently looking at Ecopetrol (EC), I came across Parex Resources (PARXF), which has a similar investment case, excluding government ties. Parex is Colombia’s largest independent oil & gas company and has a great track record of rewarding its shareholders. Its share price currently hovers at the pre-pandemic level, while outstanding diluted shares have decreased 35% from 2018 levels. At the same time production is up 22%, and they've paid out $240M in dividends of their current $1.6B market cap....
Parex Resources: Dirt-Cheap Oil Producer Amidst Political Fears