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Goldman Sachs bets on Permian Resources stock for its top-tier Permian Basin assets

EditorEmilio Ghigini
Published 2024/09/30, 11:28
PR
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On Monday, Goldman Sachs began coverage on Permian Resources Corp (NYSE:PR) stock with a Buy rating, setting a price target of $19.00. The firm highlighted Permian Resources as a company with strong fundamentals poised to outperform its peers in the oil and natural gas industry, particularly due to its focus on the Permian Basin.

Permian Resources was noted for its scarcity value as one of the few high-quality, pure-play companies concentrating on the Permian Basin, especially the Delaware Basin, which is known for its superior resource quality. This focus is expected to lend the company a competitive edge over its peers.

The firm also emphasized Permian Resources' commitment to cost leadership, citing both cash operating costs and drilling and completion costs as areas where the company excels. While these costs are currently projected to remain stable over the long term and are below FactSet consensus, Goldman Sachs suggested there is potential for further improvements.

Additionally, the company's strong local relationships in the Permian Basin were recognized as a significant advantage. These relationships are believed to contribute to better price discovery for services and materials, which supports the company's cost leadership.

Moreover, these connections are also seen as beneficial for Permian Resources' active mergers and acquisitions strategy, potentially leading to better inorganic growth performance relative to its competitors.

Goldman Sachs' coverage initiation and the optimistic price target reflect a positive outlook on Permian Resources' strategic positioning within its industry. The firm's analysis points to various factors that could contribute to the company's success in the competitive landscape of oil and natural gas production.

In other recent news, Permian Resources Corp has been the focus of a steady stream of developments. The company has reported a significant increase in oil production during its second quarter, with output reaching 153,000 barrels per day, and a total of 339,000 barrels of oil equivalent per day.

In a strategic move, Permian Resources has acquired Barilla Draw assets from OXY, a development expected to add high-return inventory in the Texas Delaware region and bolster future growth.

Furthermore, Permian Resources has 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. The company's Board of Directors has approved a substantial expansion of its share buyback program, doubling the authorization for share repurchases from $500 million to $1 billion.

Roth/MKM has reiterated a Buy rating for Permian Resources, maintaining a steady price target of $20.00. This decision is based on the company's consistent return of capital to shareholders through dividends and buybacks, alongside reasonable production growth. These recent developments reflect Permian Resources' commitment to strategic growth, financial stability, and shareholder value.

InvestingPro Insights

The positive outlook presented by Goldman Sachs aligns with several key metrics and insights from InvestingPro. Permian Resources Corp (NYSE:PR) has demonstrated impressive revenue growth, with a 99.89% increase in quarterly revenue as of Q2 2024. This robust growth supports Goldman Sachs' view of the company's strong fundamentals and potential to outperform peers.

InvestingPro Tips highlight that analysts anticipate sales growth in the current year, further reinforcing the positive revenue trajectory. Additionally, the company has been profitable over the last twelve months, with a healthy operating income margin of 37.77% for the same period.

The company's dividend policy is also noteworthy, with InvestingPro data showing a substantial dividend yield of 5.7% and a remarkable dividend growth of 105% over the last twelve months. This aligns with an InvestingPro Tip indicating that Permian Resources has raised its dividend for three consecutive years, potentially making it an attractive option for income-focused investors.

While Goldman Sachs set a price target of $19.00, it's worth noting that InvestingPro's fair value estimate stands at $15.24, suggesting there may still be room for upside from the current price.

Investors interested in a more comprehensive analysis can access additional insights through InvestingPro, which offers 8 more tips for Permian Resources Corp.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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