In my thinking about FEC, I started looking at, and thinking about, PXT a little bit more. My conclusion is that I think that PXT has made a really good deal here. The FEC deal is retroactive to January 1, 2026, which means that PXT is capturing all of this elevated oil pricing. PXT and FEC’s oil sales are also both based on Brent crude, which trades at a premium to WTI, which is an added bonus.
After being a market rockstar historically, PXT, in recent years, has been a bit of a fallen angel trading at a discount multiple because investors never really knew where its next development project was coming from… PXT had gone down a road that saw it drilling very expensive and deep exploration wells in the Foothills of the Llanos basin with little success. FEC, on the other hand, had loads of development inventory and reserves, but lacked the sizzle and market profile for anyone to care much about it. Together, the asset packages are very complementary. PXT is basically paying PDP NAV for FEC’s assets give or take a hundred million or so, and FEC’s 1P and 2P reserves are substantially higher than its PDP reserves. PXT can use its strong cash flows to develop FEC’s “boring” reserves, resulting in bigger scale and a more predictable production outlook. Going into the deal, PXT had no debt, but coming out of it PXT will be lightly leveraged… not a bad switch in my mind in order to capture FEC’s assets and it means that PXT is making this acquisition without issuing a single share.
I did some quick calculating and I think that PXT’s pro forma 1P NAV will be around $41/share (2P should be around $60/share) based on last year’s price decks. With PXT trading at around $26 as I type this, I think that’s too big of a discount given how much bigger and better PXT will be once the FEC assets are integrated. I’m shooting from the hip a little bit here, but I think my instincts are right. Once the deal closes, PXT should provide updated guidance and an updated NAV table. In the meantime, I get a healthy ~6.2% annual dividend yield.
I’ve made a relatively chunky initial entry into the name because I think I have a good value backstop and a good case for a valuation re-rate here given the complementary nature of the two asset bases, but I’ll see what the street thinks after the deal closes and the company issues new guidance. I haven’t seen a lot of pro forma analysis from brokers on the street yet, but I think that the street’s PXT price targets will be going higher once the analysts re-jig their PXT numbers after the FEC acquisition closes.