Barclays on Oil and Gas E&P: Favorite Large and Mid-Cap Stocks

Barclays on Oil and Gas E&P

Analyst, Thomas R. Driscoll, said, "On the large-cap side, EOG Resources (NYSE: EOG) and Noble (NYSE: NBL) remain our top long-term, high-quality picks. We also recommend the Anadarko (NYSE: APC) and Apache (NYSE: APA). Among companies with gas exposure we see value in the shares of balanced producers (gas revenues ~30-50% of mid-cycle revenue) such as Devon (NYSE: DVN), QEP Resources (NYSE: QEP) and WPX Energy (NYSE: WPX). We estimate that these producers would trade at group average multiples at gas prices of $2/MMbtu for QEP and WPX and $3.50/MMbtu for DVN. At the same time, we estimate that gas prices of $6/MMbtu are required for Encana (NYSE: ECA), Southwestern (NYSE: SWN) and Ultra Petroleum (NYSE: UPL) (all "dry gas") to trade at group average multiples (using 2013E cash flow), while a gas price in excess of $6/MMbtu would be required for Range Resources (NYSE: RRC)."

On mid-cap companies, Barclays' Driscoll favors Denbury (NYSE: DNR), Plains Exploration (NYSE: PXP) and Whiting Petroleum (NYSE: WLL).

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