Eric Nuttall Parex Resources Inc. PXT-T SELL Mar 11, 2025

Yield is 8.8%, sustainable for the time being, watching very closely. He also writes calls for a really juicy premium. Sold off because nothing but disappointing news. New drilling required to backfill shortfalls. If you want dividends, this is not the one. Try FRU instead.

PXT EPS was $4.32, vs estimates $4.19; revenue of $1.17B missed estimates of $1.26B. But production guidance was lowered. Parex's disappointing operational performance again in 2Q  was caused by flooding at LLA-34 and lower-than-expected results at Arauca. Still, solid financial results suggest free-cash-flow momentum may extend into 2H amid a constructive oil price backdrop. Suppressed 1H volume indicates full-year production may be at or below the low end of guidance of 54,000-60,000 barrels a day, amid an operational halt at Arauca. Climbing operating cash should cover capital outlays, which will likely be at the lower end of $390-$430 million range this year. A 32% surge in 2Q free cash underscores Parex's cash-generative profile and should accommodate its annual dividend payout of $115 million (8% yield), suggesting scope for share buybacks in 3Q. But the CFO resignation adds uncertainty, and investors will probably start questioning the dividend. The stock is VERY cheap, but it was cheap three months ago as well. Operational performance needs to improve. We think, while it is generally OK due to the revised valuation and balance sheet, buyers can wait for this to shake out some more. 
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Company spent too much money on recent oil play. Major disaster. Company will have to find a new strategy going forward. NAV = $16/share. Would not recommend investing at this time. Dividend appears safe. 

On paper, looked pretty good. Problem was the bad neighbourhood, all production was in Colombia. Change in government, civil unrest. Production growth is negative, calling dividend growth into question. Yield is 13%, not sustainable. Get out while the getting's good.

The company still is in a net cash position. We do not think a dividend cut is imminent, but we are sure management is discussing the possibility, unless they feel operational setbacks are just temporary. We would still be comfortable holding it at current levels due to its very cheap valuation and balance sheet. 
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It has broken its support resistance at $20 and the previous resistance at $30. If it forms a base then that might be a time to buy.

Tricky. In penalty box based on disastrous year. Dividend needs $80 to be truly sustainable. Based on poor share performance, CEO's job may be on the line. Risk in Colombia, sentiment remains challenged. He owns a very small position, gathering option premiums. Better names out there for new $$.

PXT is targeting average production of 45,000 boe/day in 2025. Capital expenditures will be $300M. Cash flow $445M and free cash flow $145M after dividends. This is essentially down a fraction from Q4 production results. The balance sheet is still strong and cash flow good. The dividend can still be paid IF the company wants to. It has renewed its share buyback. Essentially, analysts comments are reflecting 'lacklustre growth' and this forecast is not likely to be a catalyst for the stock, even though it remains very cheap on all metrics. 
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