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UPDATE: Canaccord Genuity Starts Earthstone Energy (ESTE) at Buy

February 25, 2015 6:36 AM EST
Get Alerts ESTE Hot Sheet
Price: $21.17 --0%

Rating Summary:
    13 Buy, 4 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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(Updated - February 25, 2015 1:55 PM EST)

Canaccord Genuity initiated coverage on Earthstone Energy (NYSE: ESTE) with a Buy rating and a price target of $33.00. Analyst Stephen Berman has a positive view of management and noted its strong balance sheet and position in Eagle Ford.

"The new ESTE – the strategic combination of Earthstone Energy and Oak Valley Resources along with additional interests in the Eagle Ford -- is led by Frank Lodzinski. The 40-plus year E&P veteran has a history of delivering value for his shareholders, most recently at GeoResources, which was sold to Halcon Resources in 2012, generating almost a five-fold return (35% IRR) for initial investors," said Berman.

"Deja vu in the EF as the ESTE team has essentially put back together the assets it ran at GeoResources before selling the company to Halcon. Oak Valley subsequently acquired the EF assets in 2013 and is clearly very familiar with them for this next goaround. The company's 23.7K net EF acres are in the core of the volatile oil window in Gonzales and Fayette Counties," continued the analyst.

Berman added, "Pro forma for the ESTE/OVR combination and Flatonia acquisition, the company had liquidity of ~$175M, with no debt other than ~$11M drawn on the $80M revolver. This covers the combined outspend we are modeling for 2015 and 2016 by two times. We look for ESTE to take advantage of its strong balance sheet/liquidity position to acquire additional assets in the EF and/or WB, especially in this depressed oil price environment."

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

Shares of Earthstone Energy closed at $30.20 yesterday.



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