UPDATE: BMO Capital Downgrades Synergy Resources Corporation (SYRG) to Market Perform
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(Updated - August 8, 2016 8:22 AM EDT)
BMO Capital downgraded Synergy Resources Corporation (NYSE: SYRG) from Outperform to Market Perform with a price target of $6.00 (from $8.00). Analyst Dan McSpirit doesn't think the stock's premium is justified.
"This change in rating comes after the company reported 2Q16 results and before the 2017 game plan is expected to be announced in a couple of weeks. In light of an oil curve without much contango ($47.00 2H16, increasing to only $50.00/Bbl by 2019) and a gas curve showing signs of backwardation, we expect the company to emphasize liquidity preservation over drilling activity increases. While preserving liquidity in a low commodity price environment is prudent, balance sheet strength alone doesn't make for much of a value proposition, nor do we see the premium at which the shares trade as justified. Put that in the context of the more competitive returns and growth rates certain other producers can generate - not surprisingly most of which are Permian names - and you have the basis for our change in rating," said the analyst.
Shares of Synergy Resources Corporation closed at $6.26 yesterday.
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