Peyto Exploration awaits recovery in European gas Prices

Natural gas prices have acted like the design in this picture.Natural gas prices have dropped down dramatically in the fourth quarter of 2022.But  analysts  expect that Russians will decrease substantially the supply of natural gas to Europe  and as a consequence other gas suppliers must pick up the slack resulting in an increase in European prices.This will act as a tail-wind bringing up north amaerican natural gas prices.Many analysts expect that the spot price will be as high as $4.50 up to $6.50  in the end of Q1 2023.This represents a 20 % to a 100% price increase having a significant positive affect on earnings in Q1. But how much of that increase will show up in Q4 of 2022?

      Q3 Highlights

        On November10  Peyto released it's Q3 report and it showed record earnings of $277 million for the first 9 months..Peyto management stated that " the realized gas price,before hedging was up 39% from Q3 2021".Funds from operations were $197 million or $1.15 per share compared to $105 million or $.63  per share in Q3 2021.Furthermore Q3 production was up as production was  104,071 boe/day compared to 89,998 in 2021 for a 17% increase.In addition, there were acquisitions of $57 million including a $26 million purchase in the Brazeau region.And now processing times are down as Peyto (PEY) bought the Aurora gas plant in Q1 2022.

    2023 is Looking Bright                  

 Peyto's Q4 results should be out around Febryary10.Production may be down slightly from Q3 while the prices received per barrel will be steady.Production maystart to rise in Q1 2023 as their capital investment program increases and they start drilling on their new acquisitions.This blog looks for earnings of  $85 to $105 million or $.55-$.70 per share.While funds from operations should be about $1.00-$1.15 per share.Consequently  annual e.p.s. will be in a range of $2.10-$2.30.And no substantial share price change is expected from Q4 earnings unless the P/E multiple moves up.As investors look ahead to Q1 2023 they may move up the P/E multiple and send PEY shares to $15 in February.

    This blog believes that tensions in Europe may cause the Russians to curtail supply of natural gas somewhat.Then pressure will be on European countries to get higher priced supply elsewhere.And this will start the movement of natural gas to the  $4.50 -$6.50 price.This will help consolidate PEY at the $15 price range and eventually move it to the $17 level in mid 2023.

                                                   https://www.marketbeat.com/;https://www.bing.com/search?q=zacks+investment+research&cvid Dale Mcintyre is a freelance writer that writes for a few select brokers