Imperial Capital Cuts Price Target on Stone Energy (SGY) Following Announced Preliminary 2016 Capex Budget

Imperial Capital maintained an Outperform rating on Stone Energy (NYSE: SGY), and cut the price target to $6.00 (from $8.00), following the company's announced preliminary 2016 capex budget of $200mn. The budget is a 55% decrease on Imperial's 2015 estimate. While the budget is yet to be approved by the board, Imperial agrees with management’s decision to stack its Marcellus/Utica rig and commit minimal capital to the Appalachian region.

Analyst Kim Pacanovsky commented, "We are maintaining our Outperform rating on SGY shares and lowering our price target to $6 from $8, about 41% above the recent share price. On 12/21/15, SGY announced a preliminary 2016 capex budget of $200mn, a 55% decrease on our 2015 estimate, with which the firm will focus on its higher margin crude oil projects in the Gulf of Mexico as well as exploring liquidity raising efforts with its ENSCO rig and deepwater drilling prospects. While the budget is yet to be approved by the board, we agree with management’s decision to stack its Marcellus/Utica rig and commit minimal capital to the Appalachian region. Assuming SGY will be able to sell down working interests in its respective prospects and achieve a farm-out/in agreement with its ENSCO rig, we believe SGY will have a much improved liquidity profile. With $530.8mn in liquidity and, importantly, the ability to operate close to cash flow through 2017, we believe that concerns over the maturing unsecured 1.75% 2017 notes are placing too much pressure on the stock."

For an analyst ratings summary and ratings history on Stone Energy click here. For more ratings news on Stone Energy click here.

Shares of Stone Energy closed at $4.26 yesterday.

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