UPDATE: Stifel Downgrades Halcon Resources to Hold Following Equity Offering, Reduced 2014 Outlook
In a report published Monday, Stifel analyst Amir Arif downgraded the rating on Halcon Resources Corporation (NYSE: HK) from Buy to Hold, and removed the $8.50 price target.
In the report, Stifel noted, “The equity offering added about 12% new shares with the proceeds simply used to reduce debt, diluting the share count. Additionally, we are lowering our 2014 production estimate 11% from 47 mboe/d to 42 mboe/d, as we clean up our 2014 outlooks, which places our number below the consensus of 47 mboe/d. Official 2014 production guidance will most likely be provided by the company with 3Q results. The impact of the larger share count and our reduced 2014 outlook reduces our 2014 CFPS from $1.69 to $1.37. As a result, the name is trading at 7.0x 2014E EV/EBITDA, which is not that attractive and results in our $8.50 target price being reduced to a fair value of $6.00/sh (7.5x 2014 EBITDA). Given the increased share count, reduced upside, and risk of 2014 consensus estimates moving lower, we are downgrading the name from Buy to Hold.”
Halcon Resources Corporation closed on Friday at $5.07.
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