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Energen's Position In Permian Basin Makes It 1 Of Williams Capital's Top Picks In Oil & Gas

Energen's Position In Permian Basin Makes It 1 Of Williams Capital's Top Picks In Oil & Gas

Williams Capital has started coverage of Energen Corporation (NYSE: EGN) with a Buy rating and $68 target price on company's strong position in the Permian Basin and balance sheet.

Energen, which is also the brokerage's top pick in the sector, has 224,000 net acres, including 86,700 net acres in the Midland Basin and 49,351 net acres in the Delaware Basin. This acreage position provides a resource potential of about 2.0 billion boe across 3,500 net engineered drilling locations.

"We also believe the Company will demonstrate improved capital efficiencies with its focus on high working interest long laterals wells in the Permian Basin. In our view, this confluence of factors should drive a re-rating and narrow the valuation gap to its Permian peers," analyst Gabriele Sorbara wrote in a note.

Related Link: 19% Upside In Cabot Oil In Williams Capital's View

Sorbara noted that Energen has the potential to add 10,000 acres in in Southwest Howard County, as it recently received a favorable ruling on an action pending in the District Court of Howard County on top leasing the Quinn Ranch.

"A positive outcome would be a windfall profit for the Company. Based on $25,000–$50,000 per acre, this asset is worth $250.0–$500.0 million, or ~$2.50–$5.00 per share," Sorbara elaborated.

Moreover, the company's strong balance sheet enables it to fund the accelerated drilling program in 2017, should commodity prices improve.

At time of writing, shares of Energen were up 1.86 percent to $57.98. Based on Friday's close, the target price of $68 represents a potential upside of 19 percent.

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Latest Ratings for EGN

Nov 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Oct 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Sep 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight

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