logo
  Join        Login             Stock Quote

WPX Energy (WPX) Initiated At 'Hold' By Deutsche Bank, $19 PT

 November 09, 2012 04:05 PM


(By Balaseshan) Deutsche Bank analyst Stephen Richardson initiated coverage of WPX Energy Inc. (NYSE: WPX) with a "Hold" rating and $19 price target.

Richardson said WPX is a transition E&P, where execution has lagged expectations over its first year as a standalone public entity. The stock trades at discounts to the peer group on all metrics, driven primarily by structural challenges of the business (not asset quality).

WPX is actively working to address the margin gap, and with improved execution should begin to close the valuation gap. The analyst looks for a path to more tangible operational improvements, and a more aggressive approach to the cost-reduction opportunity. Until further catalysts emerge, he has a "Hold" rating.

Richardson said the market has taken the view that the asset configuration and cost structure are uncompetitive and will be challenged to grow. While poorly understood by the street, a number of initiatives will see EBITDA rise by $175 million (about 15% from the fiscal 2012 base) on an annualized basis by 2015, agnostic of commodity price.

Coupling this with improved execution in the Bakken and Marcellus should see the margin & valuation gap begin to close, the analyst noted. Additionally, WPX has the opportunity to accretively divest legacy gas assets as the forward curve recovers.

While capital is not a constraint, strategically paring higher cost assets should further right size the cost structure. With significant opportunity for improvement, a sense of urgency should follow as 2013 progresses.

Not to be understated, the balance sheet (about 18% net debt/cap, 1.7 times debt/EBTIDA) is a key attribute which means the stock enjoys less absolute downside to net asset value than peers (about 7% downside on a $80/bbl & $4/mmbtu deck), Richardson noted. From a capital preservation perspective, the stock is unique amongst his coverage group.

WPX is trading up 1.13% at $15.25 on Friday.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article image7 Profitable Tech Stocks with 50-DMA turning Bullish

Lately tech has been coming out of the doldrums. That's good news for tech investors and the market as a read on...

article imageCommodity Traders Eye Strengthening Dollar

Commodity prices have been feeling the backlash of a strengthening dollar as of late, and investors it read on...

article imageThe Euro Crash?

As the US federal reserve might start soon raising interest rates and the ECB is about to being his read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Recent Articles by Balaseshan
More Articles on: Oils/Energy



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.