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Deutsche Bank Upgrades Whiting, Bill Barrett; Downgrades Climarex, WPX Energy

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In a report published Thursday, Deutsche Bank analyst Josh Silverstein said that the 2H outlook for the US Oil & Gas Exploration & Production industry remains "unappetizing," while changing the ratings of four majors.

Over the past month, there has been a group pullback of about 10 percent. The outlook for 2H15 is neutral for the E&Ps. "Although early 2015 trends of firming front month WTI price, improved well productivity, and greater and faster than expected cost reductions provide support for the next cycle, we see this largely priced into E&P's," analyst Josh Silverstein said.

The Deutsche Bank report named Newfield Exploration Co. (NYSE: NFX) and Energen Corporation (NYSE: EGN) as the Top Picks.

  • Analyst Josh Silverstein downgraded the rating on Cimarex Energy Co (NYSE: XEC) from Buy to Hold, while reducing the price target from $145 to $133. The positives of the company are management's conservative approach to development, low leverage, and upside to the Delaware and Anadarko Basin resource opportunity. The downgrade was based on:
  1. Valuation as the stock nearing the multiples of oil growth peers
  2. Lower FY16 cash margins than peers, with no support from hedges
  3. Lower volume growth than peers - 8 percent versus peers at around 10 percent
  • Deutsche Bank downgraded the rating on WPX Energy Inc (NYSE: WPX) from Buy to Hold. "CEO Rick Muncrief has only been at the helm for little over a year, adjustments made to the business model over his tenure have significantly improved the long-term outlook for WPX…However, with WPX now facing the challenge of meeting 2016 oil growth expectations against a backdrop of declining 2H volumes as Bakken completions slow and lower cash flow in 2016, we see increasing execution risk in the stock," Silverstein wrote.
  • Analyst Josh Silverstein upgraded the rating on Whiting Petroleum Corp (NYSE: WLL) from Hold to Buy, while raising the price target from $38 to $43. "While the Permian and Anadarko Basins remain our preferred basin for oil exposure, the 3-4x multiple gap (2016 EV/DACF) at WLL vs. oil growth peers provides an opportunity for management execution to narrow the gap and investors upside to an improving oil outlook," the report said.

Whiting Petroleum's stock has underperformed OAS by about 25 percent over the past three months, despite exhibiting "similar strong Williston Basin productivity trends in 1Q, a larger base of quality inventory to drive better capital efficiency, and holding more levers to de-risk the balance sheet, providing flexibility to accelerate growth heading into 2016."

  • Deutsche Bank upgraded the rating on Bill Barrett Corporation (NYSE: BBG) from Hold to Buy, while raising the price target from $12 to $14, citing "improving execution in the DJ Basin and 4:1 risk/reward opportunity with the support of a ~90% oil hedge profile at ~$90/bbl and ample liquidity."

Latest Ratings for NFX

Oct 2016Evercore ISI GroupDowngradesBuyHold
Aug 2016Williams CapitalInitiates Coverage onBuy
Aug 2016CitigroupMaintainsNeutral

View More Analyst Ratings for NFX
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Posted-In: Deutsche BankAnalyst Color Upgrades Downgrades Price Target Analyst Ratings


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