Jefferies Cuts 2017 Natural Gas Price Forecast, Changes Ratings on Producers

Print Email

Just as a rising tide lifts all boats, an ebb tide, while it doesn’t sink them, makes the going a bit tougher. For natural gas producers, a relatively mild winter so far has left storage caverns at elevated levels and weighed on the commodity price of the fuel.

From a high of around $3.80 per million BTUs at the beginning of the year, natural gas for April delivery closed Friday at $2.83, but gas has traded as low as $2.45 in the first two months of the year.

Analysts at Jefferies have lowered their 2017 natural gas price forecast from an average of $3.50 per million BTUs to $3.15, even though the firm said it believes that prices will improve over the long term due to a tighter supply/demand balance, excluding the effects of weather on demand.

Costs for well completions are expected to rise more than drilling costs, and overall costs are projected to increase by about 10% to 15%. The analysts stuck with their long-term natural gas price of $3.50 per million BTUs.

Jefferies reviewed the 14 stocks in their oil and gas exploration and production universe and made several changes to ratings, targets and earnings per share (EPS) estimates. Because most also produce liquids, rising prices for crude also figure into the Jefferies calculations. Here’s the rundown.

Cabot Oil & Gas Corp. (NYSE: COG) is rated as a Hold with a new price target of $24. The EPS estimate has been cut from $0.60 to $0.47 for 2017, and the 2018 estimate has been increased from $0.70 to $1.19. Shares closed at $22.36 on Friday in a 52-week range of $19.77 to $25.74. The consensus 12-month price target is $28.72.

Carrizo Oil & Gas Inc. (NASDAQ: CRZO) is rated a Buy with a lowered price target of $48. The EPS estimate for 2017 has been lowered from $1.65 to $1.41, and the 2018 estimate was raised from $3.90 to $4.02. Shares closed Friday at $31.18, in a 52-week range of $24.18 to $43.96, and the consensus 12-month estimate is $46.52.

Cimarex Energy Co. (NYSE: XEC) is rated Hold with a raised price target of $134. The 2017 EPS estimate has been raised from $4.10 to $4.69, and the 2018 estimate was raised from $7.76 to $8.97. The stock closed Friday at $125.61, in a 52-week range of $124.99 to $146.96. The consensus price target is $159.68.

Concho Resources Inc. (NYSE: CXO) is also rated a Hold with a higher price target of $150. For 2017, Jefferies raised its EPS estimate from $0.33 to $1.32, and for 2018 the estimate was lifted from $2.91 to $3.50. The stock closed at $132.41 on Friday, in a 52-week range of $94.26 to $147.55, and the consensus 12-month target is $167.46.

CONSOL Energy Inc. (NYSE: CNX) was raised to Buy but the price target dropped to $22. The EPS estimate for 2017 was cut from $0.70 to $0.48, and the estimate for 2018 was raised from $1.09 to $1.20. Shares closed Friday at $15.45. The 52-week range is $9.66 to $22.34, and the consensus price target is $21.92.

Devon Energy Corp. (NYSE: DVN) is rated Hold and the price target was raised to $49. The 2017 EPS estimate was increased from $1.39 to $2.00, and the 2018 estimate increased from $3.06 to $3.83. Shares closed at $43.35 on Friday, in a 52-week range of $21.15 to $50.69. No consensus price target was available.

Encana Corp. (NYSE: ECA) is rated Buy with an unchanged price target of $16. The EPS estimate for 2017 was lowered from $0.42 to $0.34, and the 2018 estimate was also lowered, from $1.47 to $1.28. The shares ended the week at $11.44, in a 52-week range of $4.90 to $13.85. The consensus 12-month price target is $14.95.

EQT Corp. (NYSE: EQT) is rated Hold and the price target was lowered to $69. The 2017 EPS estimate was also lowered, from $1.54 to $0.68, and the 2018 estimate was raised from $1.26 to $1.65. Shares closed at $59.29 on Friday, in a 52-week range of $56.38 to $80.61. The consensus 12-month price target is $83.00.

Noble Energy Inc. (NYSE: NBL) is rated a Buy and Jefferies raised the price target to $47. The 2017 net loss estimate was lowered from $0.40 per share to $0.22 per share. The 2018 EPS estimate was raised from $0.94 to $1.34. Shares closed at $36.71 on Friday, in a 52-week range of $28.82 to $42.03, and the consensus price target is $48.22.

Oasis Petroleum Inc. (NYSE: OAS) is rated a Buy and the price target was lifted to $24. For 2017, the net loss estimate improved from a prior $0.27 per share to $0.23 per share. The 2018 EPS estimate rose from $0.62 to $0.64. Shares closed at $14.13 on Friday. The 52-week range is $5.93 to $14.35, and the consensus 12-month target is $17.87.

Pioneer Natural Resources Co. (NYSE: PXD) is rated a Buy with an unchanged price target of $245. The 2017 EPS estimate was lowered from $3.08 to $2.92, and the 2018 estimate was lowered by a penny to $9.82. The stock closed Friday at $194.18, in a 52-week range of $122.08 to $199.83. The consensus 12-month target is $227.37.

Range Resources Corp. (NYSE: RRC) is rated Buy with a lowered price target of $43. The 2017 EPS estimate has been lowered from $0.85 to $0.68, and the 2018 estimate was lowered from $1.60 to $1.52. Shares closed at $27.34 on Friday, in a 52-week range of $27.07 to $46.96, and the consensus price target is $46.42. Range Resources is a Jefferies Franchise Pick.

Rice Energy Inc. (NYSE: RICE) is also rated Buy with an unchanged price target of $26. The 2017 EPS estimate was raised from $0.47 to $1.49, and the 2018 estimate was lifted from $0.63 to $1.32. Shares closed Friday at $19.98, in a 52-week range of $9.20 to $29.36, and with a consensus 12-month target of $30.52.

Southwestern Energy Co. (NYSE: SWN) is the only stock in this group to get a rating boost. The Jefferies analysts lifted the rating from Underperform to Hold. The 12-month price target was unchanged at $8. The 2017 EPS estimate was lowered from $0.81 to $0.52, and the 2018 estimate was lowered from $0.99 to $0.94. Shares closed Friday at $7.71, in a 52-week range of $6.62 to $15.59, and the consensus price target on the stock is $12.59.