Rodman & Renshaw Raises PT on Stone Energy to $34

Rodman & Renshaw has published a research report on Stone Energy SGY and has raised the price target from $32 to $34. In the report, Rodman & Renshaw writes, "After diligently developing its position in the Marcellus Shale over the past few years, SGY is getting a glimpse of its potential in the play…and results are looking better than expected. At its Mary field in Wetzel County, WV, the company has flow tested 11 wells at rates of 3-5 MMcf/d with a condensate yield of 70-100+ Bbl/MMcf. The wet gas stream also contains NGL volumes of 40+ Bbl/MMcf. This results in a combined rate of 5-9 MMcfe/d (40%-45% liquids) per well, or a much richer liquids yield than we had been assuming. Additionally, SGY has increased its position in the Marcellus to ~90,000 net acres (from ~75,000 net at last count) with most of the fresh leasing on its condensate-rich area in northern West Virginia. We are updating our valuation of SGY's Marcellus upside to account for a higher liquids cut and an expanded acreage position in West Virginia. While we are leaving our EUR and well cost estimates essentially unchanged at 4.0-4.5 Bcfe and $5.5-$6.0 million, respectively, the higher condensate yield and NGL uplift in the Mary area significantly enhance the economics of those wells. The net effect is a ~$2/share increase to our NAV. We continue to believe our EUR estimate could be conservative and plan to reassess as well performance dictates." Rodman & Renshaw maintains its Market Outperform rating on Stone Energy, which closed yesterday at $23.35.