Global Hunter Securities 'Top Concerns' In E&P

Global Hunter Securities issued its E&P Sell-rated "Top Concerns" Tuesday. Analysts led by Mike Kelly introduced the research note by stating that "$60 is the new $90" when it comes to oil prices and that the E&P industry was "busy recalibrating and gearing up for growth despite lower crude prices." Certain companies concerned the analysts, however, and the firm turned "more bearish on the prospects for the fringier or Tier 2 E&Ps" and noted that some "simply can't compete." Below are the firm's points for each of the "Top Concerns" along with price targets. Halcon Resources Corp

- Sell, $1.00 price target 1. "Bottom tier debt-adjusted production growth outlook through FY18E at ~2 percent." 2. "Net debt/EBITDA grows to 7.5x by YE18, projected EV/EBITDA expands to 8.5x as hedges roll off." 3. "NAV upside appears limited given relatively light tier 1/economic inventory and huge share count." SandRidge Energy Inc.

- Sell, $1.25 price target 1. "Falling oil production (-6 percent in 2015E, -12 percent in 2016E) and hedges rolling off leads to lower cash flows ($460MM EBITDA in 2016E vs. $560MM in 2015E), reducing ability to grow (-8 percent DAG CAGR)." 2. "Balance sheet stretching to uncomfortable levels in 2015 and 2016 with net debt/EBITDA potentially exceeding 6.0x and 8.0x, respectively." Goodrich Petroleum Corporation

- Sell, $2.00 price target 1. "Viability of TMS in question at current prices; GDP doesn't have the luxury of time/science spend." 2. "Net Debt/EBITDA not sustainable (climbs to 5.9x/9.4x in FY15/16) given absent meaningful oil growth." 3. "Valuation remains unappealing (projected EV/EBITDA of 7.3x/11.6x in FY15/16, respectively)." Triangle Petroleum Corporation

1. "Challenged drillbit IRRs of 16 percent on a $70 long-term oil price, among the lowest in the group." 2. "Valuation multiples and leverage expand significantly as growth slows (projected EV/EBITDA moves to 8.6x/9.7x and net debt/EBITDA to 5.2x/6.2x in FY15/16, respectively)." Bill Barrett Corporation

1. "Bottom quartile debt-adjusted growth through FY18E at ~3 percent." 2. "Leverage expands in FY15/16 (net debt/EBITDA at 3.1x/6.7x, respectively) as hedges roll off." 3. "Restricted flow back on long-lateral wells = too much upfront capex; hurting cash management/capital efficiency."