Provident Q1 Results
May 18th, 2008 by Grant in: Investing, Oil & Gas, Royalty TrustsOver a week ago Provident Energy (PVX: chart, web, Y!) released their 2008 first quarter results. After venturing out of town on business for a week, I’m finally starting to catch up on the market events, which, by industry standards are now old news.
A few highlights from the report:
- Funds flow from operations in the Canadian Oil and Gas Production and Midstream business units, as well as oil and gas production in the U.S. was up 107% to $180 million or $0.71 per unit.
- Distributions for Q1 totaled $0.36 per unit, equating to a payout ratio of 59%, down from 91% in Q1 2007.
- Production increased to 52,300 boed, up 61% from Q1 2007 due to acquisitions and internal development.
- Canadian oil and gas production averaged 27,600 boed in Q1 ‘08 as compared to 24,300 boed in Q1 ‘07, an increase of 13%.
- Production remains fairly balanced at 51% natural gas and 49% crude oil and NGL (natural gas liquids).
- The May distribution will continue to be $0.12 CDN payable on June 13th.
Corner Office Thoughts
This company continues to impress me. We’re starting to see the results of well tendered acquisitions in 2007 as an effort to replace reserves and increase production and drilling potential.
It’s good to see the payout ratio drop as I thought it would, but I had no idea it would drop by 32%. The effect is that this leaves good opportunity for one of two moves: increase the monthly distribution, or continue to invest in acquisitions to replace reserves and increase production. Personally I’d like to see the distribution left alone, and the added net cash flow used to further production.
As of today’s writing, Provident stock stands at $11.94 per share. This time last year I’d consider taking some off the table and buying back on the dips below $11. However, with the increase in production (funds flow from operations doubled) and the lowered payout ratio, Provident is starting to look cheap, even at these levels.
I’m looking to buy more PVX in small chunks, but only after we see a retrace of the price action over the last couple days. The stock has seen a solid run up, spurred on by the Q1 report, and I think there may be some profit taking in the works over the next week. An order placed at $11.50 per share is reasonable.
Tags: oil and gas | PVX
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May 19th, 2008 at 11:59 pm
Like the American Public, I am slowly coming around. The more you talk the more I like this stock. You really would still buy seeing that it is getting close to two year highs around $13 a share?
May 20th, 2008 at 4:47 pm
I think the increase in production justifies a price per share higher than $13. Realistically I see $16 long term.
Near term though, I’m looking for a pull back. I’d like to see a down day here in the next day or two just to make sure there is some semblance of rationalism to the stock. I’d buy shares at $12 today if I could.