PVAC Ranks Second in Terms of Q3 Cash Flow Growth Expectations



Cash flow from operations growth

Penn Virginia (PVAC), a pure play Eagle Ford–focused exploration and production company, ranks second among upstream companies in terms of cash flow from operations growth.

Wall Street analysts expect the partnership to post cash flow from operations of $74.2 million in the third quarter compared to $14.3 million in the third quarter of 2017, representing a 420% increase YoY (year-over-year). However, it’s 9.2% lower than PVAC’s previous quarter’s cash flow from operations.

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The company’s huge cash flow from operations growth is expected to be driven by strong production growth, higher average realized sales prices, and lower operating expenses. The company expects average daily production of 23,500–24,500 boepd (barrels of oil equivalent per day) in the third quarter, 155% higher than in the third quarter of 2017.

PVAC expects lease operating expenses and gathering, processing, and transportation expenses of $4.25–$4.75 per boe (barrel of oil equivalent) and $2.25–$2.75 per Boe, respectively, lower than its previous guidances of $4.50–$5.00 per boe and $2.75–$3.00 per boe, respectively.


PVAC was trading at a forward price-to-cash flow from operations multiple of 3.8x on October 17, below its historical average of 5.4x and the industry median of 5.2x. Analysts expect PVAC to report cash flow from operations of $289.9 million in 2018 compared to $81.7 in 2017, representing a 255% YoY increase and a significant premium to the industry median of 60.5%.

For 2019 and 2020, the company is expected to post cash flow from operations growth of 59.7% and 40.6%, respectively.

Analysts’ recommendations

A total of 100.0% of analysts surveyed by Reuters rate Penn Virginia as a “buy” as of October 17. PVAC is currently trading below the low range ($88) of analysts’ target prices. Its average target price of $103 offers a ~39% potential upside from its current price level.

In the next article, we’ll look at Centennial Resource Development’s (CDEV) third-quarter cash flow growth expectations.


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