Analyst Actions: Credit Suisse Lifts Penn West Exploration Target Price; Revises Estimates
Brent Price Forecast Unchanged But NYMEX Weakness Could Persist Near-term. "Credit Suisse has updated its commodity price view to reflect downward adjustment to NYMEX natural gas prices and a narrower differential between WTI and Brent. The Brent oil price forecast itself is unchanged. For NYMEX gas, Credit Suisse expects weakness to persist near-term as production takes time to fall in response to falling rig counts (mitigating factors include wells behind pipe, liquids drilling and efficiency gains). The long term view of the NYMEX gas price is unchanged at $5.50. The Brent forecast continues to reflect a 3.4% global GDP growth rate for 2012 with downside demand risk balanced by real supply risk across MENA and other significant producers (e.g., Venezuela, Russia, Nigeria)."
Revising Penn West Estimates After New Oil Price Forecasts. "Incorporating our new oil and gas price forecasts, we have made the following changes to full year estimates for Penn West. Our 2011 EPS/CFPS go from C$1.62/3.17 to C$1.75/3.35 while 2012 go from C$1.03/3.97 to C$1.08/4.09. Our 2013 EPS estimate is raised to C$2.28 from C$2.26."
Raising Target Price to C$27 with 'Outperform' Rating. "With higher near-term cash flow benefitting from stronger oil pricing and a narrower WCS differential, we have taken our Penn West target from C$26 to C$27. Our target is based on 5.25x 2013E EBIDAX of C$2,928 million, a ~20% discount to mid-cap peers given execution risks. With significant total return potential to our target we are maintaining our Outperform rating at this time."
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