Oppenheimer Initiates Coverage On Newfield Exploration

Oppenheimer initiated coverage on Newfield Exploration Co. (NYSE: NFX) with an Outperform rating and $35 price target.

Analyst Robert Du Boff believed that “NFX’s historical valuation gap to the exploration & production group will narrow as it completes its transition from a diversified, global E&P to a more focused strategy based on North American liquids growth.

“Although NFX has fairly limited exposure to the more heralded US basins, we think liquids growth and exploration upside will drive sentiment amid a bearish commodity price environment. More important, it has a significant hedge position for 2015-16, which will support cash flows as the Street takes an ax to estimates in the energy space.”

Du Boff noted that “NFX has 70 percent of 2015-16 production locked in at ~$90/b vs. the current strip price of $65-70/b. Although we are bearish on the E&P group overall, expecting consensus numbers to drop considerably, hedging gains should enable CFPS growth in each of the next two years.”

The analyst note cited valuation as another compelling component with “NFX is trading at 11.3x P/E, 2.6x P/CF, and 3.9x EV/EBITDA, based on 2015E consensus, discounts of 45 percent, 47 percent, and 30 percent, respectively, to the Oppenheimer E&P universe.”

Newfield Exploration Co. recently traded at $23.59m up 0.13 percent.