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Penn Virginia Takeout 'Still Possible,' SunTrust Says

Penn Virginia Takeout 'Still Possible,' SunTrust Says
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In a report published Monday, SunTrust Robinson Humphrey analyst Neal Dingmann maintained a Buy rating on Penn Virginia Corporation (NYSE: PVA) with a price target of $10.

"Penn Virginia continues to be an embattled Eagle Ford player with what we deem as a valuable contiguous acreage/asset position (we derive NAV over $11/sh) though high leverage and relatively tight liquidity limit near-term activity/cash flow/catalysts," analyst Neal Dingmann said.

Despite the challenges, Penn Virginia seems to be an interesting acquisition candidate, in view of its large number of locations. The company is among the "largest attractive acreage positions versus the corresponding enterprise value."

Penn Virginia has had to lower the number of rigs drilling from 8 to 2, resulting in slowing cash flow. The CFPS estimate for 2016 has been reduced from $3.35 to $3.09.

Penn Virginia is operating two rigs on its Eagle Ford position, "primarily drilling higher return Lower Eagle Ford wells in the Peach Creek region." In the report SunTrust noted, "While we remain confident that Upper Eagle Ford wells could become economic soon, the lack of results by Penn Virginia or other Eagle Ford operators make economies of scale difficult for the play today."

Penn Virginia made an outspend of more than $199mm in 1Q15. It has about $240mm liquidity, with the outspend expected to have slowed to ~$25mm per quarter, since only two rigs are operational. "Given current well costs, IPs, and EURS; it appears the company could add a rig in Shiner or Gonzales if the NYMEX price of oil were to increase to over $65/Bbl as this would ensure at least a 20%+ IRR," Dingmann added.

Latest Ratings for PVA

Nov 2015Canaccord GenuityDowngradesBuyHold
Oct 2015KLR GroupDowngradesBuyHold
Aug 2015SusquehannaMaintainsNeutral

View More Analyst Ratings for PVA
View the Latest Analyst Ratings

Posted-In: SunTrust Robinson HumphreyAnalyst Color Reiteration Analyst Ratings Best of Benzinga


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