Deutschse Bank Downgrades Some Oil & Gas E&P Stocks (SWN, RRC, DVN); Remain Long-Term Natural Gas Bulls

December 15, 2008 7:47 AM EST

Deutschse Bank is downgrading three recent outperformering Oil & Gas E&P stocks. The firm is downgrading Southwestern Energy (NYSE: SWN), Range Resources (NYSE: RRC) and Devon Energy (NYSE: DVN) from Buy to Hold. The firm said they may revisit this in the future.

Deutschse Bank said they are increasingly concerned about the outlook for natural gas prices moving into 2009, but said their long-term gas bull case is undeterred.

The firm said the worse 2009 gets, the better 2010 could be. They think once a pricing recovery comes it will be steeply V-shaped as domestic production plunges, likely right as the economy turns. This makes them long-term natural gas bulls, and their two most favored plays are the Haynesville and the Appalachian Devonian/Marcellus shales. The firm said it is critical to have a hedging "safety net" and for these reasons continue to recommend XTO Energy Inc. (NYSE: XTO), Equitable Resources Inc. (NYSE: EQT), Chesapeake Energy (NYSE: CHK) and EXCO Resources (NYSE: XCO).

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