Simmons Assumes Overweight Rating, $48 Target On Noble Energy

Simmons & Company analysts, Pearce Hammond, Kashy Harrison, and Buddy Alpaugh, have assumed Overweight rating on Noble Energy, Inc.

shares and kept a price target of $48. The brokerage said that Noble Energy lagged behind the E&P group this year (up 14% vs. the EPX up 36%) following its outperformance in the group last year. According to the analysts, the underperformance is attributed to investor interest in onshore focused producers, beta driven rally off the bottom driven by poorer balance sheet firms and Israel. Simmons analysts said, "We believe the underperformance supports an attractive entry point for long term, value oriented investors in a high quality, diversified E&P with exposure to both short cycle (US onshore) and long cycle (DW GoM, West Africa, Israel) assets." The brokerage asked at What Oil Price Increase Activity? At $50 WTI (with some belief in stability at that price), the analysts indicated, Noble Energy would consider additional capital allocation to the DJ and/or Delaware. However, they expect it will maintain a discipline of living within cash flow. The investment firm listed four catalysts with the first catalyst being the potential activity increase of $50 WTI. The other three are Well results (DJ, Permian, Eagle Ford), Leviathan FID later this year or early next year, and Katmai appraisal. The analysts said that Noble provided 28% upside potential to its price target. They have added, "On '17E EV/EBITDAX, NBL trades at 9.5x vs. large cap peers at 11.2x. We estimate YE'16 net D/EBITDAX of 2.6x for NBL vs. large cap peers at 2.8x." The stock traded 0.40 percent higher on Wednesday.