Simmons Upgrades Eclipse Resources (ECR) to Neutral
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Simmons, a unit of PIper Jaffray, upgraded Eclipse Resources (NYSE: ECR) from Underweight to Neutral with a price target of $4.00 (from $3.00).
Analyst Pearce Hammond commented, "One of the primary reasons for our moving to an UW rating earlier this year was due to worries about ECR's balance sheet and leverage, as well as concerns over the natural gas macro. However, neither of these worries are justified at this point. Following their late Jun '16 equity offering, ECR has $334M of liquidity (pro-forma for the $123M net equity offering proceeds) with an undrawn revolver. We estimate YE'17 net D/EBITDAX at 2.5x. In addition, we believe the improving natural gas macro (we expect the storage surplus relative to the prior year and 5 year average to continue shrinking) should provide a tailwind for ECR. The stock screens better on cash flow ('17E EV/EBITDAX at ~6x) than on PT/NAV (15% upside potential). Operationally, ECR is making solid forward progress with the super long lateral Purple Hayes well performance."
Shares of Eclipse Resources closed at $3.48 yesterday.
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