UPDATE: Citigroup Upgrades Hess Corp to Buy on Dropping Capital Intensity
Citigroup raised its rating on Hess Corp (NYSE: HES) from Neutral to Buy but reduced its price target from $65 to $57.
Citigroup noted, "We are upgrading HES to Buy from Neutral. We maintain our High Risk rating. Our upgrade is based on our belief that the HES's historical spending patterns and lack of capital discipline will change. We expect the company will reduce capital intensity, reduce exploration spending and sell nonstrategic assets. We estimate asset sales will provide additional liquidity while HES moves through its stated peak spending this year. We are reducing our target price to $57 to reflect Citi Research's expectation for lower oil prices through 2013. We have also reduced our valuation to take into account a historic pattern of uneconomic exploration activity, which we may remove pending a more visible reduction in exploration spending."
Hess Corp closed at $44.99 on Thursday.
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