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Analyst Actions: Credit Suisse Initiates Coverage of Coastal Energy CO

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Low-Risk Growth. "In 2011, Coastal achieved exploration success at its Bua Ban North oil field and was able to bring forth commercial production and cash flow within months after discovery. Moving into 2012, the Bua Ban North field will be entering the development phase and looks to be the growth engine in the near term. We therefore view Coastal's near-term growth as clear, present, and likely attainable at relatively low risk."

Successful Bua Ban Exploration Can Spur Step Change. "On the heels of exploration success at Bua Ban North in 2011, Coastal looks to explore in a number of prospective new fields, including Bua Ban South beginning in mid-January 2012. We expect initial results as early as the same quarter. The company will be chasing the same Miocene trend as Bua Ban North. Current estimates have Bua Ban South to be of similar size to Bua Ban North, with P50 recoverable resources of approximately 67 mmbbls. Successful exploration here would likely represent another step change in production, cash flow and reserves."

Initiating Coverage with 'Outperform' Rating, TP at C$18.50. "Our C$18.50 target price is a weighted triangulation of three approaches to valuation, including M&A comparable transactions (50% weighting), peer group relative valuation (35% weighting), and our near-term growth expectations for the company (15% weighting). Our M&A valuation was US$14.11 per share and peer group relative valuation was US$16.43 per share, while our near-term growth valuation was US$38.91 per share. Our methodology incorporates a degree of conservatism with the amount of booked reserves at Bua Ban North and the valuation of those reserves. We are therefore biased toward the upside with respect to our valuation and target price."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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