Is PrimeEnergy Still Worth Buying After Surging 82% in 6 Months?

Over the last six months, PrimeEnergy Resources Corporation PNRG stock surged 81.8%, significantly outpacing the industry’s 14.1% growth. The company outperformed other upstream energy players, including Diamondback Energy, Inc. FANG and APA Corporation APA, which posted declines of 9.3% and 22%, respectively, during the same period. With rising global energy demand and favorable oil and gas price trends, PNRG's long-term prospects appear solid. Image Source: Zacks Investment Research Below, we explore the company’s key fundamentals and strategic initiatives.Company Snapshot: PrimeEnergy’s Strategic ApproachEstablished in 1973 and headquartered in Houston, TX, PNRG is an independent oil and natural gas producer. PrimeEnergy’s strategies revolve around financial flexibility, partnerships with leading operators and a diversified portfolio of drilling projects. In addition to its core activities, the company owns assets such as a 60-mile offshore pipeline in Texas through a wholly-owned offshore company and an interest in a retail shopping center in Alabama, adding diversification to its portfolio.Capitalizing on the Permian Basin’s Rich ResourcesPrimeEnergy holds substantial assets in Texas and Oklahoma, focusing significantly on the Permian Basin. The company prioritizes horizontal drilling, enhancing production while minimizing surface disruption.In 2023, PNRG participated in drilling 35 horizontal wells and completed 56 such wells by the end of the third quarter of 2024. These efforts underscore its commitment to ramping up production. PrimeEnergy has a 12.5% overriding royalty interest in 30,000 acres in West Virginia, although this asset has yet to generate revenues, pending future development.Among its key projects, PrimeEnergy contributed to 34 new horizontal wells in Reagan County, TX, in the first quarter of 2024. These wells, operated by Double Eagle and Civitas, target key formations within the Permian Basin. The company allocated $140 million for these initiatives in 2024 and plans to invest another $95 million in similar projects in 2025.PNRG identified 28 potential drilling sites in West Texas for 2026-2027, with an estimated investment of $67 million. The company plans to invest more than $300 million in horizontal development in West Texas in the coming years. This forward-looking strategy highlights its commitment to leveraging advanced drilling methods and targeting high-yield regions.Portfolio Optimization & Strategic TransactionsPrimeEnergy continues to optimize its asset portfolio through acquisitions and divestitures. Recently, the company acquired 100 net acres in Reagan County for $1.11 million while selling non-core assets like the Eastern Oil Well Service Company for $2.8 million, realizing a gain of $1.92 million. These transactions demonstrate PNRG’s focus on capital efficiency and its ability to align its portfolio with evolving market opportunities.Growth Catalysts for PrimeEnergyEnhanced Drilling Focus: PNRG's investments in horizontal drilling, particularly in West Texas, enable higher production rates and faster returns than traditional vertical drilling. This approach aligns with broader industry trends to maximize resource recovery.Rising U.S. Oil Output: The U.S. Energy Information Administration projects record crude oil production levels of 13.5 million barrels per day by 2025, driven largely by the Permian Basin. PrimeEnergy, with significant operations in the region, is poised to benefit from these favorable production dynamics.Positive Price Environment: Natural gas prices are forecast to rise, with the Henry Hub spot price expected to climb from $2.20/MMBtu in 2024 to $3.10/MMBtu in 2025. This upward trend, coupled with increased LNG exports, supports higher revenue potential for PrimeEnergy’s natural gas operations.Operational PerformancePrimeEnergy has achieved significant production growth. For the nine months ending Sept. 30, 2024, oil production skyrocketed 131% year over year to 1.88 million barrels, while natural gas production soared 82% to 5.03 million Mcf. NGL production also surged 112% to 874,000 barrels. These results highlight the company’s ability to capitalize on favorable market conditions and improve well productivity.ValuationPNRG is currently trading at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) ratio of 2.86X compared with the industry average of 7.52X. This suggests relative undervaluation and the metric remains lower than the company’s peers, including Diamondback Energy (10.52X) and APA Corp. (6.16X), suggesting an opportunity for potential investors. Image Source: Zacks Investment Research Challenges to WatchDespite its strengths, PrimeEnergy faces several risks. Geopolitical tensions, potential changes in trade policies and OPEC+ production cuts could disrupt supply chains or impact price stability. Slower-than-anticipated oil consumption growth in key markets, such as China, may dampen demand. Increasing production from non-OPEC countries in 2025, coupled with slower demand growth in Asia, could lead to oversupply conditions and downward pressure on prices. Image Source: U.S. Energy Information Administration (EIA) Final Thoughts: Is PrimeEnergy Worth Buying?PNRG has demonstrated a robust operational performance, strong production growth and strategic investments in high-yield regions like the Permian Basin. The company's focus on horizontal drilling, portfolio optimization and financial efficiency positions it to capitalize on favorable industry dynamics, including rising global energy demand, and positive oil and gas price trends.With an attractive valuation — trading at a trailing 12-month EV/EBITDA ratio of 2.86X, significantly below industry peers — PrimeEnergy offers a compelling investment opportunity. Despite risks such as geopolitical and macroeconomic uncertainties, the company's strategic initiatives and undervaluation make it a potential buy for investors seeking exposure to the upstream energy sector.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report APA Corporation (APA): Free Stock Analysis Report Diamondback Energy, Inc. (FANG): Free Stock Analysis Report PrimeEnergy Corporation (PNRG): Get Free ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks