On Friday, JPMorgan updated its view on Permian Resources Corp (NYSE:PR), increasing the price target to $18.00 from $17.00. The firm maintained an Overweight rating on the stock. The adjustment comes with expectations of a strong operational quarter for the company. JPMorgan's oil production estimate stands 1% above the Street's estimate, although their cash flow and EBITDA estimates are below the Street's expectations due to market conditions.
The firm acknowledged investor concerns regarding Permian Resources' well productivity, referring to initial data from second-quarter turn-in-lines (TILs) that appeared underwhelming.
However, recent communications from the company suggest that these figures were affected by temporary constraints, including infrastructure and water issues, which have since been resolved. The company's management is confident in achieving consistent well productivity in 2024 as compared to 2023.
Permian Resources has been focusing on driving efficiency gains in the field, which have led to improved capital efficiency. As a result, JPMorgan has slightly raised its third-quarter production and capital expenditure estimates to reflect the continued improvements in cycle times in the field.
Furthermore, the company's recent acquisition of Barilla Draw, which was finalized late in the third quarter, is expected to contribute approximately 1.1 thousand barrels of oil per day to JPMorgan's third-quarter oil production estimate for Permian Resources. This acquisition is viewed as a positive addition to the company's operational capacity.
In other recent news, Permian Resources Corp reported strong Q2 results, with oil production reaching 153,000 barrels per day and a total of 339,000 barrels of oil equivalent per day. Goldman Sachs initiated coverage on Permian Resources with a Buy rating, noting the company's strong fundamentals and competitive edge due to its focus on the Permian Basin.
The company also issued $1 billion in 6.25% senior unsecured notes due in 2033, while simultaneously announcing a cash purchase offer for its outstanding 7.75% Senior Notes due 2026.
Permian Resources also acquired Barilla Draw assets from OXY, a move expected to bolster future growth. Roth/MKM reiterated a Buy rating for Permian Resources, based on consistent return of capital to shareholders through dividends and buybacks, and reasonable production growth. The company's Board of Directors approved a substantial expansion of its share buyback program, doubling the authorization from $500 million to $1 billion.
These recent developments reflect Permian Resources' commitment to strategic growth, financial stability, and shareholder value. The company's plans to maintain current rig and frac counts and target an investment-grade credit rating by 2025 further demonstrate this commitment.
InvestingPro Insights
Permian Resources Corp (NYSE:PR) demonstrates strong financial performance, aligning with JPMorgan's positive outlook. According to InvestingPro data, the company's revenue growth is impressive, with a 99.89% increase in the most recent quarter. This robust growth supports JPMorgan's expectation of a strong operational quarter.
InvestingPro Tips highlight that Permian Resources has raised its dividend for 3 consecutive years, with a current dividend yield of 5.35%. This consistent dividend growth, coupled with the company's profitability over the last twelve months, reinforces its financial stability and potential for investor returns.
The company's P/E ratio of 10.29 suggests that it may be undervalued compared to its peers, which could explain JPMorgan's Overweight rating and increased price target. Additionally, analysts anticipate sales growth in the current year, further supporting the positive outlook for Permian Resources.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide deeper insights into Permian Resources' financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.