PrairieSky Royalty shares fell more than 6% on Tuesday after the company reported first quarter financial results. The royalty company earns royalty production revenues through the production of oil and natural gas from its properties.
PrairieSky’s (PSK) total revenues came in at C$59.5 million for 1Q 2021, an increase of 13% from 1Q 2020. In addition, funds from operations were C$48.8 million (C$0.22 per share) in the first quarter of 2021, reflecting an increase of 5% over the first quarter of 2020.
Total Q1 2021 royalty production revenue was C$56.7 million, 15% higher than Q1 2020 royalty production revenue. However, royalty production averaged 19,380 BOE per day, a decrease of 13% from Q1 2020 royalty production volumes.
PrairieSky’s President Andrew Philips said that first quarter 2021 results demonstrate the resilience of the company’s high margin business model. He noted that PrairieSky completed the previously announced acquisition of Deep Basin at the end of February. Additionally, exploration and development activities in 1Q 2021 increased from 4Q 2020 but remained below levels of 1Q 2020 before the start of the COVID-19 pandemic.
Furthermore, the company declared a quarterly dividend of C$14.5 million (C$0.065 per common share). (See PrairieSky Royalty stock analysis on TipRanks)
Following 1Q results, RBC Capital analyst Luke Davis downgraded the stock to Hold from Buy with an unchanged C$15 price target (17% upside potential).
Davis told investors in a research note that he downgraded the stock because much of the strong commodity pricing has already been priced in.
Overall, the consensus among Wall Street analysts is a Moderate Buy based on 5 Buys and 4 Holds. The average analyst price target of C$14.80 implies an upside potential of about 15% to current levels. Shares have jumped by about 50% over the past six months.
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