A Shift In Strategy Earns Resolute Energy A New Price Target From Barclays

Barclays termed the shift in Resolute Energy Corp REN to the Delaware Basin as a positive one helping to boost its estimates.

Analysts Jeffrey Robertson and Oswald Cheung increased their target price from $8 to $25 on shares to reflect expanded multiples, with an Equal-Weight rating.

The brokerage lifted its production outlook from 16.06 Mboe/d to 17.24 Mboe/d in 2017 and from 16.92 Mboe/d to 20.00 Mboe/d in 2018. As a result, CAPEX projections have also been lifted from $155 million to $205 million in 2017 and from $200 million to $250 million in 2018.

The analysts said in a note, "While we are encouraged by the company's first seven Wolfcamp A well results, we maintain a relatively conservative stance and await further well results before more closely aligning our forecasts with the company's outlook."

The brokerage comments came on the heels of Resolute Energy unveiling a three-year production guidance indicating that production might reach 30.0 Mboe/d in 2018 supported by two rigs.

Barclays sees financial flexibility in Aneth asset following a shift to the Permian. The lead analyst expects monetization of Aneth in the years to come so that it could focus on the Delaware Basin with addition funds deployment.

The brokerage sees the shift enabled it to repair its balance sheet. As a result, it sees a drop in leverage to 3.5x from the previous outlook of 3.7x for the period ending 2018.