UPDATE: Canaccord Genuity Starts Energen (EGN) at Buy
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(Updated - September 19, 2016 10:50 AM EDT)
Canaccord Genuity initiated coverage on Energen (NYSE: EGN) with a Buy rating and a price target of $66. Analyst Sam Burwell sees 19% production CAGR through 2018. He also highlighted its streamlined asset base and clean balance sheet.
"Until recently, EGN had been something of an afterthought in comparison to Permian high flyers PE, FANG and RSPP, due to what was considered more marginal acreage, a legacy San Juan asset and greater leverage. However, we are of the view that both its Midland and Delaware positions can support meaningful growth with WTI in the ~$40s," said Burwell. "Also, after having sold the rest of the San Juan and non-core Delaware this summer, we believe the streamlined EGN should trade at a higher multiple. Given that the valuation discount to peers still lingers, we believe EGN's strengths are not yet fully factored into the shares."
The analyst added, "Assuming the majority of its DUCs are completed in H1/17 and it maintains a 3rig program next year, we see EGN easily hitting the "high-teens" production growth guidance. We model a 5-rig program in 2018 with a more normalized completion schedule. Given the clean balance sheet and economic asset base, we believe EGN's growth trajectory should be relatively resilient. Lastly, the increasing use of larger fracs and simply being early on the Delaware learning curve could ultimately make our production estimates conservative."
Shares of Energen closed at $52.83 yesterday.
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