Q: How would you think about this company, in terms of debt? Too much?
Thanks.
Thanks.
5i Research Answer:
PEA is a small-cap natural gas producer, net debt is around $174M, the debt/market cap is around 4.0x. Debt/cash flow is less than 2X which is probably manageable unless cash flow declines, which is possible with lower commodity prices. We think the debt level is too high compared to peers. PEA has size risk, cyclicality in its business model, and with the stock down 77% this year it is going to be hard for it to generate any investor interest.