Deutsche Bank (DB) analyst Stephen Richardson downgraded his rating on shares of Newfield Exploration Co. (NYSE:NFX) to "Hold" from "Buy" and reduced price target to $45 from $56.
"Fiscal 2011 results and the fiscal 2012 outlook from NFX highlighted what we expected to be a tough print as reduced activity stemmed operating momentum," Richardson wrote in a note.
While clearly a transition year, the analyst has viewed the 2012 outlook as palatable as an inventory of uncompleted wells and retrenchment into core regions would mitigate risks to the outlook.
Richardson said he downgrade the rating on NFX shares as flat production is now expected for 2012, focus is shifting to a new play and the liquids growth in 2013 is still a key question.
While DB cannot fault any single investment decision, the whole leads to a lower production ramp, less Uinta focus, and less clarity surrounding direction of 2013 than the firm had hoped.
Richardson said he is loath to reactively change ratings, but the outlook makes clear 2012 as a transition year with more operational risk than he envisioned.
The analyst has viewed the stock in a narrow near-term downside/upside range (mid-30s / mid-40s) with upside to the mid-$50s (NAV of $56) based on visibility of an activity ramp in the Uinta in 2013+. His risked NAV moves to $45/share, he sees downside support in the $36/share range.
NFX is trading down 12.66 percent at $36.90. The stock has been trading between $34.42 and $77.93 for the past 52 weeks.