KLR Group Upgrades Energen (EGN) to Buy; Sees Significant Growth Ahead

November 7, 2016 8:13 AM EST
Get Alerts EGN Hot Sheet
Price: $54.12 --0%

Rating Summary:
    23 Buy, 14 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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KLR Group upgraded Energen (NYSE: EGN) from Accumulate to Buy with a price target of $73.00 (from $69.00), saying significant growth is on the horizon.

Analyst Gail Nicholson commented, "We are upgrading EGN from Accumulate to Buy and increasing our target price $4 to $73 due to a ~2.5% improvement in our capital productivity assumption, a ~5% increase to our '17 growth expectation, and a ~5% decrease in cash operating expenses.

EGN generates a '18 capital yield (cash recycle ratio) of 165%+, up from ~160% previously, and above the group median of ~130%. The company trades at a premium to its oil-dominant peer group on '17 EV/EBITDA (~8.7x vs. ~7.7x), although its production CAGR ('16-'18) of ~20% is ~1.3x higher. EGN has a strong balance sheet with a '17 net-debt-to-EBITDA ratio of ~0.9x and has improved its organic capital intensity by ~20%. The stock has several potential catalysts ahead including the continued performance from its upsized fracs (company plans to utilized Gen 3 fracs in '17 although the uplift is not accounted for in its production guide) and its balance sheet (undrawn $1.05 billion borrowing base and $350+ million in cash at YE'16) that allows the company flexibility to either further accelerate activity or take advantage of potential acquisitions."

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

Shares of Energen closed at $50.66 yesterday.

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