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UPDATE: BMO Capital Markets Reiterates Market Perform Rating, Raises PT on EXCO Resources

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In a report published Wednesday, BMO Capital Markets reiterated its Market Perform rating on EXCO Resources (NYSE: XCO), and slightly raised its price target from $4.00 to $5.00.

BMO Capital noted, “Rather than drill, EXCO appears more inclined to use cash flow to buy gas PDP and hedge the rate of return, which we think would be high single digits and lower than that of drilling in DeSoto Parish. As such, we think this strategy is better pursued within the conventional MLP discussed, which could have ~$700 mn in assets. We'd note that at year-end EXCO had conventional assets with ~$675 mn in PV-10 at $4.16Mcfe NYMEX (lower than strip) and ~$1.7bn NOL to shield any tax gain, so an MLP of this size appears realistic. Also, EXCO indicated it could have an announcement next week around the approach it will take with TGGT, which is likely to be a sale with four offers currently in. We value EXCO's share of TGGT at ~$450-500 mn and expect proceeds to be used to pay down debt, although a reduced borrowing base could offset the increased liquidity.”

EXCO Resources closed on Tuesday at $8.19.

Latest Ratings for XCO

Jul 2015RBC CapitalUpgradesUnderperformSector Perform
May 2015Stephens & Co.UpgradesUnderweightEqual-Weight
Jan 2015BarclaysMaintainsUnderweight

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Posted-In: BMO Capital MarketsAnalyst Color Price Target Analyst Ratings


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