Synergy Resources Volumes Are 'Poised To Ramp' Into Positive Macro Environment

Analysts at Wells Fargo have initiated coverage of Synergy Resources Corp SYRG with an Outperform rating and a valuation range of $13–$16 as they see upside potential over the next six to 12 months, “with strong economics substantially driving value across inventory locations.”

“We estimate wellhead breakeven prices in the DJ basin at $30.10, ranking closely behind Permian and STACK (both $29 and change), making for strong present value economics across SYRG's inventory locations,” the analysts wrote in a note.

Further, the analysts expect better realizations and cash margins, given the company is expected to ramp volumes into improving macro environment.

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In addition, the analysts expect an uptick in margins as fixed-fee midstream contracts represent a decreasing portion of production.

Wells Fargo projects 2016 and 2017 EPS estimates at -$1.19 and $0.18, respectively. The analysts forecast a two-year production compound annual growth rate (CAGR) of 65 percent, which is the highest in Wells Fargo universe.

In addition, the analysts see the 2018 estimated EBITDA multiple at 6.0x well below the group average of 8.1x, “making the stock one of the least expensive ways to gain exposure to high growth, top-tier returns within the E&P space.”

Shares of Synergy Resources closed Monday’s trading at $7.33. At last check in early Tuesday trading, the stock was up 1.77 percent at $7.46.

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Posted In: Analyst ColorLong IdeasNewsPrice TargetCommoditiesInitiationMarketsAnalyst RatingsMoversTrading IdeascrudeCrude OilNatural GasOilOil & GasWells Fargo Securities
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