Devon Energy (NYSE:DVN) is undervalued in almost all the key valuation metrics against its peers, and Ticonderoga Securities said they're maintaining their "Buy" rating on them as a result.
"We view DVN as an undervalued asset base that should generate better results given the shift in focus toward onshore unconventional resource plays. And with $3.6B of cash on hand currently (excluding the expected $3.2B close of Brazilian assets), the company is in a strong financial position as well. The company’s shares are trading below peers on almost all relevant valuation metrics, including at a steep discount to our $118.00 NAV. The resulting P/NAV of 66% compares with a group median of 78% for our E&P universe. DVN’s EV/2010 EBITDA is 5.0 compared with 7.1 for the group and its P/CF is 5.9 compared with 6.4 for the group, said Ticonderoga.
"Today’s news (earnings report) is positive and supports our Buy rating, and should please investors who have been looking for consistent results/growth from DVN quarter-to-quarter. We would look toward the year-end reserve report for signs of better organic growth and improving finding cost as an indication that the company’s resource strategy is working long-term. We don’t believe the sharp discount to peers is justified, and would continue to look for periods of weakness when the stock/group trades down to accumulate shares."
Devon surged to close at $68.22 Wednesday, gaining $2.29, or 3.47 percent. Ticonderoga has a price target of $78 on Devon.
Showing posts with label Ticonderoga Securities. Show all posts
Showing posts with label Ticonderoga Securities. Show all posts
Thursday, November 4, 2010
Wednesday, November 3, 2010
Anadarko (NYSE:APC) Building Up Strong Cash Balance, Production Guidance Down
The latest quarterly report of Anadarko Petroleum (NYSE:APC) was somewhat mixed, reflecting lower international production, but stronger production in the U.S.
Ticonderoga did say one thing they like is the way Anadarko is building up their cash balance.
"Anadarko reported its 3Q last night. The GAAP results were ($0.05)/share versus our ($0.10)/share estimate. Adjusted earnings were $0.26/share versus consensus of $0.29/share. 3Q production was 629.3 kboe/d versus our 613.5 kboe/d estimate. U.S. oil production was at the high end of company guidance, while international oil production was at the low end of guidance. 4Q production is forecast to be down 2% to 617 kboe/d based on the midpoint of guidance. Previously, we had been forecasting production to be up 1%. Most notably, U.S. gas production next quarter is forecast to be down 5.5% over 3Q," said Ticonderoga.
"We are marking our estimates to reality and incorporating 4Q guidance. Our 4Q estimate rises to ($0.23)/share from ($0.17)/share, and the full year increases to $1.06/share from $0.94/share. Most interestingly on the financial front is the fact that APC is amassing a considerable cash balance."
Anadarko closed up at $63.82, gaining $0.66, or 1.04 percent on Tuesday. Ticonderoga maintains a "Neutral" rating on them.
Ticonderoga did say one thing they like is the way Anadarko is building up their cash balance.
"Anadarko reported its 3Q last night. The GAAP results were ($0.05)/share versus our ($0.10)/share estimate. Adjusted earnings were $0.26/share versus consensus of $0.29/share. 3Q production was 629.3 kboe/d versus our 613.5 kboe/d estimate. U.S. oil production was at the high end of company guidance, while international oil production was at the low end of guidance. 4Q production is forecast to be down 2% to 617 kboe/d based on the midpoint of guidance. Previously, we had been forecasting production to be up 1%. Most notably, U.S. gas production next quarter is forecast to be down 5.5% over 3Q," said Ticonderoga.
"We are marking our estimates to reality and incorporating 4Q guidance. Our 4Q estimate rises to ($0.23)/share from ($0.17)/share, and the full year increases to $1.06/share from $0.94/share. Most interestingly on the financial front is the fact that APC is amassing a considerable cash balance."
Anadarko closed up at $63.82, gaining $0.66, or 1.04 percent on Tuesday. Ticonderoga maintains a "Neutral" rating on them.
Friday, October 29, 2010
Whiting Petroleum (NYSE:WLL) Outperforms on Lower Costs
Whiting Petroleum (NYSE:WLL) had a solid quarter based on getting operational costs under control, leading them to beat expectations for earnings per share.
Ticonderoga Securities said, "WLL reported its 3Q last night. Earnings were $0.05 ahead of our $1.27 estimate, driven largely by better than expected costs. Production was in line with our estimate...Based on company guidance, we are raising our 4Q EPS estimate to $1.71 from $1.50, which brings our 2010 full-year estimate to $5.51, up from $5.27. We also revised our 2011 EPS estimate to $7.63 from $6.72.
"We reiterate our rating on the stock due to valuation. Our NAV remains unchanged at $116/share. Currently, the stock trades at 86% of our NAV versus 76% for our coverage universe."
Ticonderoga maintains their "Neutral" on Whiting.
Whiting closed at $98.53, losing $1.48, or 1.48 percent. They have a market cap of just above $5 billion.
Ticonderoga Securities said, "WLL reported its 3Q last night. Earnings were $0.05 ahead of our $1.27 estimate, driven largely by better than expected costs. Production was in line with our estimate...Based on company guidance, we are raising our 4Q EPS estimate to $1.71 from $1.50, which brings our 2010 full-year estimate to $5.51, up from $5.27. We also revised our 2011 EPS estimate to $7.63 from $6.72.
"We reiterate our rating on the stock due to valuation. Our NAV remains unchanged at $116/share. Currently, the stock trades at 86% of our NAV versus 76% for our coverage universe."
Ticonderoga maintains their "Neutral" on Whiting.
Whiting closed at $98.53, losing $1.48, or 1.48 percent. They have a market cap of just above $5 billion.
Monday, October 18, 2010
Ticonderoga Launches Coverage on Range Resources (NYSE:RRC)
Ticonderoga Securities started its coverage of Range Resources (NYSE:RRC) off with a "Buy" rating and a price target of $45, citing strong growth from Marcellus Shale and natural gas price support at current levels.
"RRC is an independent exploration and production company largely weighted toward natural gas, which accounts for 84% of its proven reserve base. While more than half of RRC’s production currently comes from the Mid-Continent/Southwest region of the U.S., the company’s reserves, growth, and upside are dominated by its activities in the Appalachian Basin and its leverage to the developing Marcellus Shale...While we have yet to identify any short-term catalyst for natural gas markets we see little downside in gas prices from here. RRC’s valuation should be viewed as an attractive entry point, especially for longer-term investors."
No one can be exactly sure, but one possible catalyst which could drive gas prices down is the ongoing recession. If people aren't able to afford current prices or incremental increases in natural gas, they will rebel or simply not pay it. Either way it could hurt natural gas companies.
There's a reason many natural gas companies have been buying up oil assets.
Range Resources closed Friday at $37.59, gaining $0.28, or 0.75 percent.
"RRC is an independent exploration and production company largely weighted toward natural gas, which accounts for 84% of its proven reserve base. While more than half of RRC’s production currently comes from the Mid-Continent/Southwest region of the U.S., the company’s reserves, growth, and upside are dominated by its activities in the Appalachian Basin and its leverage to the developing Marcellus Shale...While we have yet to identify any short-term catalyst for natural gas markets we see little downside in gas prices from here. RRC’s valuation should be viewed as an attractive entry point, especially for longer-term investors."
No one can be exactly sure, but one possible catalyst which could drive gas prices down is the ongoing recession. If people aren't able to afford current prices or incremental increases in natural gas, they will rebel or simply not pay it. Either way it could hurt natural gas companies.
There's a reason many natural gas companies have been buying up oil assets.
Range Resources closed Friday at $37.59, gaining $0.28, or 0.75 percent.
Friday, October 15, 2010
Chesapeake Energy (NYSE:CHK) Will Remain the Same in Short Term
With Chesapeake Energy (NYSE:CHK) saying at its Analyst Day that they're going to continue with their strategy of acquiring acreage in 2011, Ticonderoga Securities said they see nothing to change the outlook for the company until they finish that stage of their operations.
Ticonderoga said, "CHK's outlook for 2011 of continued acreage spending with joint venture funding means more of the same in the near-term. Given the stock’s under performance, the market has clearly disagreed with management’s analysis of the value added behind the 5 major joint ventures agreements CHK has announced since mid-2008. Although CHK appears steeply undervalued at a P/NAV of 40%, we see nothing that has changed that view among investors and maintain our neutral rating on CHK as we look ahead to 2012."
On the other hand, once the expansion stage slows down, presumably in 2012, Chesapeake could begin a long upward run. That assumes they slow down spending and pay down their debt.
"Barring any new 'million acre plays' beyond what CHK sees today, the company would expect its aggressive acquisition of land to fall off in 2012, allowing the company to generate free cash flow and reduce debt in order to improve its investment grade," concluded Ticonderoga.
Ticonderoga maintains a "Neutral" on Chesapeake, which closed at $22.96 Thursday, dropping $0.28, or 1.20 percent.
Ticonderoga said, "CHK's outlook for 2011 of continued acreage spending with joint venture funding means more of the same in the near-term. Given the stock’s under performance, the market has clearly disagreed with management’s analysis of the value added behind the 5 major joint ventures agreements CHK has announced since mid-2008. Although CHK appears steeply undervalued at a P/NAV of 40%, we see nothing that has changed that view among investors and maintain our neutral rating on CHK as we look ahead to 2012."
On the other hand, once the expansion stage slows down, presumably in 2012, Chesapeake could begin a long upward run. That assumes they slow down spending and pay down their debt.
"Barring any new 'million acre plays' beyond what CHK sees today, the company would expect its aggressive acquisition of land to fall off in 2012, allowing the company to generate free cash flow and reduce debt in order to improve its investment grade," concluded Ticonderoga.
Ticonderoga maintains a "Neutral" on Chesapeake, which closed at $22.96 Thursday, dropping $0.28, or 1.20 percent.
Tuesday, October 5, 2010
Ticonderoga Maintains "Neutral" on Chesapeake (NYSE:CHK)
Chesapeake Energy (NYSE:CHK) has a "Neutral" maintained on them by Ticonderoga Securities, citing the huge volumetric production payment with Barclays (NYSE:BCS).
"Chesapeake today announced a 5-year volumetric production payment with Barclay’s Bank PLC, for $1.15B. The transaction covers 390 Bcf of proved reserves in the Barnett Shale, which equates to $2.95/Mcf. This should not be a surprise to the market, since this is the 8th VPP deal in 3 years...The short-term comparables are favorable, but the long-term outlook is bearish...We are concerned that CHK’s pursuit for unconventional oil assets will be a repeat of the factors that led to the stock’s under-performance during its natural gas land grab (high debt, rapid increase in shares, high finding cost)," said the Toconderoga analyst.
Although Chesapeake said they're going to use the capital to pay down debt related to a revolving credit facility, VPP are considered debt themselves by rating agencies.
"Chesapeake today announced a 5-year volumetric production payment with Barclay’s Bank PLC, for $1.15B. The transaction covers 390 Bcf of proved reserves in the Barnett Shale, which equates to $2.95/Mcf. This should not be a surprise to the market, since this is the 8th VPP deal in 3 years...The short-term comparables are favorable, but the long-term outlook is bearish...We are concerned that CHK’s pursuit for unconventional oil assets will be a repeat of the factors that led to the stock’s under-performance during its natural gas land grab (high debt, rapid increase in shares, high finding cost)," said the Toconderoga analyst.
Although Chesapeake said they're going to use the capital to pay down debt related to a revolving credit facility, VPP are considered debt themselves by rating agencies.
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