Own A Leader In Oklahoma's STACK and SCOOP Plays... Newfield Exploration

• Shares of Newfield Exploration Co. NFX have plunged 40.7 percent over the past three months, hitting a low of $23.71 on January 20.
• Imperial Capital’s Kim Pacanovsky has initiated coverage of the company with an Outperform rating and price target of $27.
• Pacanovsky believes that the company is a leader among the Oklahoma STACK and SCOOP plays, with a balance sheet that is well positioned for a downturn.

Analyst Kim Pacanovsky believes that “there will be continued weakness in the independent E&P sector, but NFX’s positioning for a “lower for longer” scenario should help it to continue to outperform its peers.”

Pacanovsky pointed that out Newfield Exploration has a strong balance sheet, along with a large acreage foorprint in Oklahoma’s core STACK and SCOOP plays, which offers the company “years of high IRR growth opportunity.”

According to the Imperial Capital report, Newfield Exploration has the “staying power” to survive any prolonged commodity downturn, with the company’s improved performance combined with lower costs expected to drive production growth, along with high economic returns till there is a recovery.

Given the current oil pricing, Pacanovsky expects the company’s total capex for 2016 at $820 million, with a 72-gross well program for the year in the STACK.

Even with this reduced activity, Pacanovsky believes that 100 percent of the company’s STACK acreage would be delineated by mid- 2017.

“Therefore, in 2017, the company should enter full scale development in the play and receive the benefit of further efficiencies associated with pad drilling,” the report added.