We reiterate our Buy recommendation for XTO Energy (XTO) shares ahead of the company's quarterly results. While credit concerns and commodity-price weakness may weigh on near-term valuation, the company's long-term prospects remain positive, given its substantial growth potential.

Management is expected to use approximately $1 billion in free cash flow next year to pay down debt. XTO Energy is expected to maintain its strong production-growth momentum volumes are expected to rise 29% in 2008 and 22% in 2009.

We also like the company's impressive acreage holdings in some of the best basins in the U.S., including the shale basins. XTO has hedged approximately 70% of its expected 2009 volumes at an equivalent price of $11 per Mcfe. This lowers the company's near-term commodity-price exposure, which given current market concerns is a key positive for the company's risk profile.