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(Idea) Is Parex Resources A Buy After Disappointing Q2 Results?
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(Idea) Is Parex Resources A Buy After Disappointing Q2 Results?

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HFI Research
Aug 20, 2024
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(Idea) Is Parex Resources A Buy After Disappointing Q2 Results?
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Note to readers: Dollar figures in this article refer to Canadian dollars unless otherwise specified.

Parex Resources (PXT:CA) stock has sold off by 28%, to $17.50 from its recent high of $24.40 in April. The selloff occurred in response to the company’s second-quarter results, and we believe it is overdone.

PXT shares now trade below the company’s liquidation value as represented by its proved, developed, and producing (PDP) net asset value per share. PXT has a reputable reserve auditor in GLJ. We believe the auditor’s estimates of PXT’s PDP quantity and value serve as a fair proxy for liquidation value to its shareholders. At the current share price, PXT shares trade at a 6% discount from its $18.62 PDP net asset value per share.

Furthermore, after their selloff, PXT shares now trade at the low end of their long-term trading range since 2018. The shares’ performance since 2017 is shown below.

The market’s overreaction to PXT’s second-quarter results and the stock's long-term trading range provide an attractive short-term buying opportunity.

The Cause of PXT’s Selloff

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