Market Overview

SunTrust Turns Bullish On Cimarex Energy, Says Permian Development Not Fully Reflected In Share Price

SunTrust Turns Bullish On Cimarex Energy, Says Permian Development Not Fully Reflected In Share Price

Cimarex Energy Co (NYSE: XEC) has guided to allocating 85 percent of its drilling and completion budget to the Permian in 2019, according to SunTrust Robinson Humphrey. 

The trend of development being weighted to the Permian is likely to continuing over the coming years and should bring the company’s stock valuation closer to that of its Permian-weighted peers, the sell-side firm said in a Monday upgrade note. 

The Analyst

Neal Dingmann upgraded Cimarex Energy from Hold to Buy and raised the price target from $75 to $85.

The Thesis

Cimarex Energy completed the acquisition of Resolute Energy’s 21,200 net acres in the Delaware Basin in the first quarter, Dingmann said in the note. (See his track record here.) 

At the same time, Cimarex maintained its 2019 capex guidance, which is commendable, the analyst said. 

SunTrust expects the company to increase production in 2019 and beyond and to generate free cash flow.

Cimarex Energy will likely continue to optimize its well spacing; maximize net present value and capital return; and simultaneously maintain low leverage, Dingmann said.

The company is among the “more proven conservative operators with continued strong well performance” while keeping leverage below 1x, he said. 

Cimarex's ability to operate within cash flow will allow it to undertake internal and external initiatives such as aggressive debt repayment, dividend hikes and accretive acquisitions, the analyst said.  

Price Action

Cimarex Energy shares were down 0.12 percent at $68.47 at the time of publication Monday.

Related Links:

Benzinga's Top Upgrades, Downgrades For May 20, 2019

Earnings Scheduled For May 8, 2019

Latest Ratings for XEC

Nov 2020Morgan StanleyMaintainsOverweight
Oct 2020Raymond JamesUpgradesMarket PerformOutperform
Oct 2020Truist SecuritiesUpgradesHoldBuy

View More Analyst Ratings for XEC
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