Morningstar | Reducing Peyto FVE on Lower Gas Prices, but Stock Still Looks Oversold
We are lowering our fair value estimate for narrow-moat Peyto Exploration & Development to CAD 6 per share from CAD 7. AECO gas prices have tumbled 70% in June since their May highs, and we expect Peyto’s gas realizations to suffer a similar fate. The stock has declined over 4% this year as the market is also aware of the declining price realizations as pipeline shortages plague Canada. However, we think the stock continues to look oversold at current levels. We expect price realizations to normalize to higher levels when crude and natural gas pipelines are built within the next five years. As such, we think that the sell-off has been overexaggerated, and we see some upside at current levels. We are maintaining our narrow moat rating.Peyto Energy is an unincorporated open-ended limited purpose trust established under the laws of the Province of Alberta. Through its direct and indirect subsidiaries, Co. is engaged in the acquisition, exploration, development and production of oil and natural gas in Western Canada.
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