Shares of PrairieSky Royalty (PSK) gained almost 3% on Tuesday after the company swung to a profit and reported a rise in revenues in the second quarter. PrairieSky, which has a portfolio of royalty lands in Canada, also announced a 38% dividend hike and the acquisition of ClearWater Royalty.
Total revenues came in at C$69.8 million in the three months ended June 30, an increase of 148% from C$28.2 million in the prior-year quarter. Funds from Operations rose 165% from a year ago to C$56.5 million.
Meanwhile, net earnings amounted to C$27.5 million (C$0.12 per share) in Q2 2021, up from a net loss of C$0.4 million (C$0.00 per share) in Q2 2020.
The Board of Directors has decided to increase the dividend by 38% to C$0.09 per share quarterly in view of the high margin cash flow generated by the business, including current commodity prices and strong activity levels.
PrairieSky has acquired a 5% gross overriding royalty on over 76,000 acres of Clearwater land in the central Marten Hills region of Alberta for C$155 million.
PrairieSky President and CEO Andrew Philips said, “The acquired royalty at Marten Hills represents a meaningful addition to PrairieSky’s already dominant Clearwater acreage position, with a near and medium-term growth trajectory and a best-in-class economic return profile. Spur is the pioneer of the Clearwater play and a proven industry leader with a long track record of success. The acquisition is consistent with PrairieSky’s long-term strategy of acquiring assets on the best part of the cost curve and that are complementary to PrairieSky’s existing portfolio. We expect the Marten Hills Acquisition will be cash flow and production accretive to shareholders in the near, medium and long term. PrairieSky continues to see quality acquisition opportunities including small and medium-sized potential transactions and will remain selective and disciplined in our evaluation of new royalty opportunities.” (See PrairieSky Royalty stock charts on TipRanks)
Last week, Scotiabank analyst Jason Bouvier maintained a Hold rating on PSK while raising its price target to C$16.00 from C$15.00. This implies 16.7% upside potential.
Overall, consensus among Wall Street analysts is that PSK is a Moderate Buy based on 3 Buys and 6 Holds. The average PrairieSky Royalty price target of C$16.63 implies 21.3% upside potential to current levels.
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