Imperial Capital Starts Stone Energy (SGY) at Outperform

Imperial Capital initiates coverage on Stone Energy (NYSE: SGY) with a Outperform rating and a price target of $18.00.

Analyst Kim Pacanovsky commented, "Over the past several years, Stone Energy has refocused itself to concentrate in two of the lowest cost regions in the U.S.: Appalachia, and the Gulf of Mexico (GOM) deepwater.

"With the recent weakness in commodity prices, SGY is focusing nearly exclusively on its development program in the Pliocene/Micoene play in the GOM – where the geology leads to high IRRs and the program is characterized by longer cycle times and thus less impact from the short-term downcycle in crude pricing. Two platform production hubs give SGY critical mass and the option of low cost tiebacks. With capex of $450mn (down about 50% from $895mn in 2014), estimated cash flow of $299mn, and cash flow outspend of $151mn, we estimate SGY should end 2015 with an estimated liquidity of $539mn, giving it plenty of firepower for 2016, even if commodity prices remain weak. Because of the low breakevens and an attractive inventory of projects, we believe SGY shares are very attractive at the current valuation at 5.0x EV/EBITDA."

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

Shares of Stone Energy closed at $13.94 yesterday.

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