CA - Parex Resources: Too Much Potential To Be Ignored
2024-05-10 06:05:18 ET
Summary
- Parex Resources completed Q1 2024 with increased production levels year-over-year, in spite of shut-ins that affected two wells.
- It has returned more than 33% of its free funds from operations (FFO) to shareholders every year since 2019, and the management remains committed to doing so in the future.
- For the last seven years, Parex has outperformed reputable peers on both gross and operating margins.
- Based on a discounted cash flow analysis (DCF), Parex appears to be trading at a 44% discount on its fair value.
Investment thesis
Parex Resources ( PXT:CA ) is a Canadian oil producer with a long history of increasing production levels. In the last ten fiscal years, the company has grown production at an impressive 13.11% CAGR without incurring any debt until 2023, when Parex reported $90 million of long-term debt. Even with this new liability, the debt-to-equity ratio does slightly decrease to 0.24x, so it is fair to say that Parex's balance sheet remains strong. Parex quadrupled its land acreage in 2021 and since then, it has been increasing its SG&A expenses at a 20% per year (vs 10-year CAGR of 7.24%), mostly due to staffing for exploration and evaluation activities on the new blocks. So the company has no plans of stopping its production growth. The company's well-guided operations have also allowed it to return $4.48 billion to shareholders in share buybacks and dividends since 2017, more than twice its current market capitalization....
Parex Resources: Too Much Potential To Be Ignored