UPDATE: Stifel Upgrades Cimarex Energy on Good Entry Point

In a report published Friday, Stifel analyst Amir Arif upgraded the rating on

from Hold to Buy, and named a $120.00 price target. In the report, Stifel noted, “We believe the pullback in XEC over the past two months, alongside the group, provides a good entry point in this name ahead of what should be an increasing and very active Delaware Basin Permian test program in 2014. This program could help firm up a meaningfully higher NAV as its acreage is better tested (across Culberson, Reeves, and Ward Counties), various zones are better tested (Wolfcamp A, C, D; Leonard Shale; Delaware sands, Bone Spring sands), optimal spacing is tested, and stacked laterals in some of the thicker zones are tested. This testing should firm up a higher risked NAV. In addition, we believe there is upside potential to 2014 consensus estimates (we are increasing our numbers in this note) from (1) potential for oilier Wolfcamp wells from the A zone, (2) capex efficiency from recently tested upsized fracs/longer laterals, and (3) potential to increase capex spending next year given the underlevered balance sheet and minimal FCF outspend. Finally, with a corporate valuation of 5.7x EV/EBITDA and multiples compressing over time, we feel that XEC offers an attractive way to invest in the Permian (even after stripping out a lower 4x-5x multiple for the Cana) relative to other Permian operators which sport multiples of 7.5x-11x. Bottom line, given the pullback, valuation, underlevered balance sheet, upcoming acceleration in Delaware Permian testing, and upside potential for 2014 outlook, we are upgrading to a Buy with a $120 target price, which reflects 6.8x 2014E EV/EBITDA target multiple.” Cimarex Energy closed on Thursday at $99.38.