Capital One Southcoast Starts XTO Energy (XTO) at Add; $75 PT

May 16, 2008 9:51 AM EDT

Capital One Southcoast initiates coverage on XTO Energy (NYSE: XTO) with an Add rating and a $75 price target.

The firm said XTO has consistently had:

• top-tier management
  
• low-cost growth
  
• performance better than the rest of the E&P group year after year

Capital One called XTO "a core holding for energy investors." As XTO has reserves of more than 80% natural gas, the firm's price target on XTO is based on a long-term nat. gas price of $9. If nat. gas prices rise closer to $10/Mcfe, Capital One feels XTO could move to $88.

The firm's valuation breakdown for XTO is as follows: $68 of proved reserves and $20 of probable reserves, minus $13 of long-term debt and negative working capital. Capital One's price target represents a potential return of 17% from today's current level aroudn $64.50.

XTO Energy, Inc. and its subsidiaries engage in the acquisition, development, exploitation, and exploration of producing oil and gas properties in the United States.

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