24/7 Wall St. » CRZO

Chesapeake Sells Utica Shale Stake to Total (CHK, TOT, BP, PXP, SD, CRZO)

Paul Ausick — Tue, 03 Jan 2012 14:34:29 +0000

In yet another of the deals that shakes up the landscape of US shale gas production, Chesapeake Energy Corp. (NYSE: CHK) has formed a joint venture with Total SA (NYSE: TOT) and privately held Enervest in which the French oil giant will pay $2.32 billion for a 25% stake in 619,000 net acres in production from the Utica shale gas play in eastern Ohio. Chesapeake has already done a deal with Total in the Barnett shale play in Texas, as well as deals with BP plc (NYSE: BP) and Plains Exploration & Production Co. (NYSE: PXP) in Arkansas, and Statoil ASA (NYSE: STO) in the Marcellus shale play in Pennsylvania.

Chesapeake isn’t alone in doing these joint venture deals. SandRidge Energy Inc. (NYSE: SD) and Carrizo Oil & Gas Inc. (NASDAQ: CRZO) have also recently sold stakes in shale gas plays.

In the latest deal, Total paid Chesapeake about $610 million in cash and will spend an additional $1.42 billion on drilling and completion costs anticipated through the end of 2014.

In the press announcement, Chesapeake’s CEO enumerated the company’s joint ventures and their value:

This Utica transaction is our seventh significant JV and in these seven JVs, Chesapeake has sold approximately 1.5 million net acres for total leasehold consideration of $14.8 billion while retaining 3.6 million net acres as of the JV date with an indicated value by the JV partners of $45.7 billion.

The Utica shale play, like the Eagle Ford play in south Texas, is liquids rich and far more valuable due to the high price companies can get for both the natural gas liquids and the oil that can be extracted using hydraulic fracturing (fracking).

But production companies may have hit a snag in Ohio. On Saturday, a 4.0-magnitude earthquake hit the Youngstown, Ohio, area and led to the state’s closure of all 177 waste water injection wells. There is some concern that the practice of injecting the recovered fracking fluids back into the ground is causing some of the quakes that have occurred in Ohio, Pennsylvania, Arkansas, and Texas.

The injection wells in Ohio are about 9,000 feet below the surface, making any risk to drinking water extremely small. A recent US EPA report on groundwater contamination from fracking in Pavillion, Wyoming, studing wells less than 300 feet below the surface.

Chesapeake’s latest joint venture, combined with the sale of its pipeline assets in the Marcellus shale announced last week, puts about $3.2 billion onto the company’s books. Chesapeake intends to garner about $7 billion in 2012 by selling assets, holding an IPO for its own oil field services company, and creating joint ventures. The company also plans to increase production by 30%. The goal is to reduce its outstanding debt by 25%.

Chesapeak’s shares are up nearly 3.5% in pre-market trading this morning, at $23.05 in a 52-week range of $22.00-$35.95.

Paul Ausick

Filed under: Oil & Gas Tagged: BP, CHK, CRZO, PXP, SD, TOT

24/7 Wall St. Top Analyst Upgrades & Downgrades of the Week (AVL, BRK-B, CRZO, DPZ, GILD, GT, GOOG, GMCR, HPQ, LULU, RIMM, SINA, WDC)

Administrator — Sat, 03 Dec 2011 12:31:31 +0000

This last week had some very interesting and influential analyst calls. We compile summaries of many top analyst upgrades, downgrades, and initiations each morning from Wall Street research calls and we then review these at the end of each week. Those calls which stand out the most become the Top Analyst Upgrades & Downgrades of the Week. This was a wild week and ended up being a massive gainer due to the coordinated central banking efforts meant at keeping liquidity in the capital markets in Europe.

The top calls of the week were seen in the following companies: Avalon Rare Metals Inc. (AMEX: AVL); Berkshire Hathaway Inc. (NYSE: BRK-B); Carrizo Oil & Gas (NASDAQ: CRZO); Domino’s Pizza, Inc. (NYSE: DPZ); Gilead Sciences Inc. (NASDAQ: GILD); Goodyear Tire & Rubber Company (NYSE: GT); Google Inc. (NASDAQ: GOOG); Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR); Hewlett-Packard Co. (NYSE: HPQ); Lululemon Athletica Inc. (NASDAQ: LULU); Research In Motion Ltd. (NASDAQ: RIMM); Sina Corporation (NASDAQ: SINA); and Western Digital Corporation (NYSE: WDC).

We have outlined the research summaries here on each, and we have added color or linked to more details on the calls if applicable.

Avalon Rare Metals Inc. (AMEX: AVL) is considered the speculative step child in the field of rare-earth metals. Still, this week came coverage from Citigroup with a “Buy” rating this last Monday. The prior closing price had been $2.63 and the stock ramped mid-week. The high close was $3.34 on Wednesday even though it closed down over 5% on Friday at $3.05. The high close in the week would have given a gain of 27% and the gain for the week was still up 16%. The 52-week range is $2.29 to $10.11, making this a leveraged call with huge upside if things work out at the company.

Berkshire Hathaway Inc. (NYSE: BRK-B) very rarely shows up in research calls, so it was a surprise when Zacks came out and named Warren Buffett conglomerate as the Bull of the Day with a $91.00 target for the next six-months.

Carrizo Oil & Gas (NASDAQ: CRZO) was only a reiterated Buy rating on Thursday by Canaccord Genuity but the implications offer huge upside if the firm is right. The firm called it a top small cap idea with multiple ways to win and with a “valuation too tepid.” The new $49.00 price target implies upside of 71%.

Domino’s Pizza, Inc. (NYSE: DPZ) was a cautious call because of valuation, but it may offer insight into how much investors should be willing to pay for the pizza delivery leader. The stock was started as Hold at KeyBanc on Friday, which was also the day that this hit a 5-year high. 24/7 Wall St. originally went out with the “buy the value here” call early in 2011 when shares were under $20.00 and we had already taken this one off the list because of value concerns. Friday’s call may point to more and more peak-values here.

Filed under: Analyst Calls, The Week, Value Investing Tagged: AVL, BRK-B, CRZO, DPZ, GILD, GMCR, GOOG, GT, HPQ, LULU, RIMM, SINA, WDC

24/7 Wall St. Closing Bell (GOOG, IAG, ERTS, STX, ONXX, CRZO, GIL, BKS, LULU, ISLE, KR, TLB, PEIX, LAVA, CLWR, STNG, HOVNP)

Paul Ausick — Thu, 01 Dec 2011 21:05:52 +0000

Equity markets opened slightly lower this morning, following yesterday’s big share price increases. For most of the day stocks traded slightly lower, although they have moved to a very slight gain in the final hour of trading. China’s purchasing managers index was weaker than expected, which is probably the reason for the slow start this morning, and then new US unemployment claims were higher than expected adding more pressure on prices. The dollar has traded weaker relative to the euro, but strengthened against the yen. Crude oil is trading down marginally at $100.18/barrel and gold is also down slightly at $1,743.870/ounce.

The unofficial closing bells put the DJIA down more than 25 points to 12,020.48 (-0.21%), the NASDAQ rose nearly 6 points (0.22%) to 2,626.20, and the S&P 500 fell -0.19% or more than 2 points to 1,244.58.

There were several analyst upgrades and downgrades today, including Google Inc. (NASDAQ: GOOG) raised to ‘buy’ at Citigroup. Other ratings action included IAMGOLD Corp. (NYSE: IAG) started as ‘outperform’ with a $25 price target at Credit Suisse; Electronic Arts Inc. (NASDAQ: ERTS) raised from ‘neutral’ to ‘buy’ at Citigroup; Seagate Technology PLC (NYSE: STX) raised to ‘buy’ at Argus; Onyx Pharmaceuticals Inc. (NASDAQ: ONXX) cut from ‘buy’ to ‘neutral’ at BofA/Merrill Lynch; and Carrizo Oil & Gas (NASDAQ: CRZO) reiterated ‘buy’ with a new price target of $49 at Canaccord Genuity.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: Gildan Activewear Inc. (NYSE: GIL) is down -30.8% at $16.53, after setting a new 52-week low of $16.52; Barnes & Noble, Inc. (NYSE: BKS) is down -16.9% at $14.50; Lululemon Athletica Inc. (NASDAQ: LULU) is down -4.8% at $47.34; Isle of Capri Casinos, Inc. (NASDAQ: ISLE) is down -8.5% at $4.51; The Kroger Co. (NYSE: KR) is up 1% at $23.41; and The Talbot’s Inc. (NYSE: TLB) is down -17.1% at $1.65, after posting a new 52-week low of $1.63. We have more details on Lululemon’s earnings and on the November sales reports from a number of retailers, including Talbot’s.

Several other standouts from today are as follows…

Pacific Ethanol Inc. (NASDAQ: PEIX) is up 26.7% at $1.33. The ethanol maker has regained compliance with Nasdaq listing requirements and has increased ownership of its four ethanol production plants to 27%.

Magma Design Automation Inc. (NASDAQ: LAVA) is up more than 25% at $7.16. The design automation firm has agreed to be acquired by Synopsys Inc. (NASDAQ: SNPS) for $7.35/share.

Clearwire Corp. (NASDAQ: CLWR) is up more than 17% at $2.09. The wireless broadband provider received a $1.6 billion investment from its majority owner Sprint Nextel Corp. (NYSE: S) that will enable Clearwire to meet its $237 million debt payment. We have more details here.

Scorpio Tankers Inc. (NYSE: STNG) are down more than -20% at $5.31. The Monaco-based petroleum shipping company priced a secondary offering this morning at $5.50/share.

Hovnanian Enterprises Inc. (NASDAQ: HOVNP) is down more than -14% at $1.31. The homebuilder has been batted around for nearly a year now, and even improving news on construction spending can’t stop the slide.

Stay tuned for Friday. We have noted speeches due from Dallas Federal Reserve President Richard Fisher, Philadelphia Fed President Charles Plosser, and Boston Fed President Eric Rosengren. Here’s another noteworthy event scheduled for tomorrow (all times Eastern):

8:30 a.m. – Non-farm payroll report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: BKS, CLWR, CRZO, ERTS, GIL, GOOG, HOVNP, IAG, ISLE, KR, LAVA, LULU, ONXX, PEIX, STNG, STX, TLB

Top Analyst Upgrades & Downgrades (AGN, CRZO, XRAY, DWA, ERTS, IAG, GOOG, LLTC, ONXX, STX, SIG, VRSN, YHOO, DGI, GEOY)

Administrator — Thu, 01 Dec 2011 13:34:55 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Thursday morning.

Allergan Inc. (NYSE: AGN) Raised to Buy at Argus.
Carrizo Oil & Gas (NASDAQ: CRZO) is named as a top small cap idea with multiple ways to win and with a “valuation too tepid” and firm reiterated a Buy rating and gave a new target of $49.00 by Canaccord Genuity.
DENTSPLY International (NASDAQ: XRAY) named as Bull of the Day at Zacks.
DreamWorks Animation SKG, Inc. (NASDAQ: DWA) Cut to Average at Caris & Co.
Electronic Arts Inc. (NASDAQ: ERTS) Raised to Buy from Neutral at Citigroup.
IAMGOLD Corp (NYSE: IAG) Started as Outperform with $25.00 price target objective at Credit Suisse.
Google Inc. (NASDAQ: GOOG) Raised to Buy at Citigroup.
Linear Technology Corporation (NASDAQ: LLTC) named as Bear of the Day at Zacks.
Onyx Pharmaceuticals, Inc. (NASDAQ: ONXX) Cut to Neutral from Buy at BofA/Merrill Lynch.
Seagate Technology PLC (NYSE: STX) Raised to Buy at Argus.
Signet Jewelers Limited (NYSE: SIG) named as value stock of the day at Zacks.
VeriSign, Inc. (NASDAQ: VRSN) named as aggressive growth stock of the day at Zacks.

Yahoo! Inc. (NASDAQ: YHOO) maintained Buy with an $18.00 price target objective at BofA/Merrill Lynch.

In the field of satellite imaging, Canaccord Genuity cut its ambitions due to austerity cuts: DigitalGlobe (NYSE: DGI) was maintained at Buy but the target was cut to $23.50; GeoEye, Inc. (NASDAQ: GEOY) was maintained as Hold and the target wass lowered to $22.00 per share.

JON C. OGG

Filed under: Analyst Calls Tagged: AGN, CRZO, DGI, DWA, ERTS, GEOY, GOOG, IAG, LLTC, ONXX, SIG, STX, VRSN, XRAY, YHOO

Top Analyst Upgrades & Downgrades (ARX, AMSF, AMAT, MT, BP, BTI, CRZO, LFC, DOLE, ITMN, LNKD, MCD, MHP, NCR, ONXX, PTEN, PAA)

Administrator — Thu, 15 Sep 2011 12:21:01 +0000

These are some of this Thursday’s top analyst upgrades, downgrades, and initiations seen having an impact from Wall Street research calls.

Aeroflex Holding Corp. (NYSE: ARX) Raised to Conviction Buy List at Goldman Sachs.
Amerisafe, Inc. (NASDAQ: AMSF) Maintained Underperform as Bear of the Day at Zacks.
Applied Materials Inc. (NASDAQ: AMAT) Raised to Outperform at Oppenheimer.
Arcelor Mittal (NYSE: MT) Raised to Buy at Citigroup.
BP PLC (NYSE: BP) Started as Underweight at Morgan Stanley.
British American Tobacco plc (NYSE: BTI) Raised to Overweight at CRedit Suisse.
Carrizo Oil & Gas Inc. (NASDAQ: CRZO) Started as Outperform at Oppenheimer.
China Life Insurance Co. Ltd. (NYSE: LFC) Raised to Buy at Goldman Sachs.
Dole Food Company Inc. (NYSE: DOLE) Raised to Overweight at JPMorgan.
Intermune, Inc (NASDAQ: ITMN) Started as Outperform at Credit Suisse.
LinkedIn Corporation (NYSE: LNKD) Started as Hold at Argus.
McDonald’s Corporation (NYSE: MCD) Reiterated Buy with $102 target at Argus.
The McGraw-Hill Companies, Inc. (NYSE: MHP) Raised to Buy at Argus.
NCR Corporation (NYSE: NCR) Started as Buy at Oppenheimer.
Onyx Pharmaceuticals Inc. (NASDAQ: ONXX) Raised to Buy at Goldman Sachs.
Patterson-UTI Energy Inc. (NASDAQ: PTEN) Raised to Outperform as Bull of the Day at Zacks.
Plains All American Pipeline, L.P. (NYSE: PAA) is the Value stock of the day at Zacks.

JON C. OGG

Filed under: Analyst Calls Tagged: AMAT, AMSF, ARX, BP, BTI, CRZO, DOLE, ITMN, LFC, LNKD, MCD, MHP, MT, NCR, ONXX, PAA, PTEN

Key Value Stocks In Energy (CRZO, KOG, HNR, CWEI, HK, PDS, DVR, XOM)

Administrator — Fri, 27 May 2011 16:18:28 +0000

As the long holiday weekend rolls in, we thought we’d take a look at some oil, gas, and energy services stocks that might offer good value in the medium term. We’ve focused on five oil and gas companies that produce hydrocarbons and two services companies: Carrizo Oil & Gas Inc. (NASDAQ: CRZO), Kodiak Oil & Gas Corp. (AMEX: KOG), Harvest Natural Resources Inc. (NYSE: HNR), Clayton Williams Energy Inc. (NASDAQ: CWEI), Petrohawk Energy Corp. (NYSE: HK), Precision Drilling Corp. (NYSE: PDS), and Cal Dive International, Inc. (NYSE: DVR).

Just this week we featured Exxon Mobil Corporation (NYSE: XOM) as being a solid value stock pick based upon peers set to benefit from this year;s driving trends, but the focus today is on an expansive list of energy companies. These companies have fairly low forward P/E ratios that could belie their true value and there are generally other driving factors as well. SOme picks will seem controversial on the surface but that is what the explanations are for in the analysis.

Carrizo Oil & Gas Inc. (NASDAQ: CRZO) explores for oil and gas primarily in the US, but also has a stake in North Sea exploration. The company’s primary holdings are in the Barnett shale, the Marcellus shale, and the Eagle Ford shale. The company’s trailing P/E ratio is negative, and its forward P/E is a meagre 7.87. It’s solid position in the Eagle Ford, a liquids-rich play, argues for a higher valuation.

Kodiak Oil & Gas Corp. (AMEX: KOG), like Carrizo, has holdings in some of the most liquids-rich gas plays in the US, with a particularly strong position in the Williston Basin’s Bakken shale. The company’s trailing P/E ratio, like Carrizo’s, is negative and its forward P/E is 8.04. And again like Carrizo, Kodiak needs to face rising cost issues. The break-even Nymex price for natural gas is more than $4.40/thousand cubic feet, but liquids-rich plays like the Eagle Ford and the Bakken practically assure solid returns, provided costs can be kept under control.

Harvest Natural Resources Inc. (NYSE: HNR) is a more global explorer for oil and gas, and does have exposure in Venezuela, which is probably why its trailing P/E ratio is negative and its forward P/E is 8.20. Investor George Soros more than doubled his stake in Harvest during the first quarter of 2011.

Clayton Williams Energy Inc. (NASDAQ: CWEI) is an oil and gas explorer that operates mainly in Louisiana and Texas. The company’s trailing P/E is 75 and its forward P/E is 8.16. The company reduced its guidance following a poor quarter where results were hit by rising costs. What makes the company a reasonable value at its current price is its heavy weighting toward oil production, which accounts for nearly 75% of its total production. Liquids are where the money is.

Petrohawk Energy Corp. (NYSE: HK) is another significant player in the Eagle Ford shale play in south Texas. The company’s P/E ratio is a blinding 252.31, while its forward P/E is 15.81. That’s still a little rich, but Petrohawk is very focused on liquids, it holds more than 330,000 net acres in the Eagle Ford play, and, maybe best of all, with a market cap of around $8 billion it could be a takeover target for one of the big oil guys.

Precision Drilling Corp. (NYSE: PDS) is an onshore drilling company that focuses on North American services. The company’s trailing P/E is a robust 58.05 and its forward P/E is 13.27. Drillers, particularly onshore drillers not affected by the moratorium in the Gulf of Mexico, have done well this year. Precision has boosted its rig utilization rate so far this year and expects to bring another dozen rigs online in 2011, with 11 going to Canada.

Cal Dive International, Inc. (NYSE: DVR) just posted dismal earnings for the first quarter. It’s trailing P/E is negative and its forward P/E is 13.27. The company has been hit by the moratorium on Gulf drilling, but it provides underwater services that are not widely available and, thus, the company has surprisingly strong pricing power. Once drilling starts up again, Cal Dive ought to perform a lot better.

An ending with a driving season note, have a great holiday weekend.

Paul Ausick

Filed under: Oil & Gas, Value Investing Tagged: CRZO, CWEI, DVR, HK, HNR, KOG, PDS, XOM

Top Analyst Upgrades & Downgrades (ARCO, CPB, CRZO, CIM, CYH, EWBC, ENER, FGP, HPQ, HUM, KBR, MOS, MYL, PAAS, CRM, THC, ZIP)

Administrator — Tue, 24 May 2011 12:35:49 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Tuesday morning.

Arcos Dorados Holdings Inc. (NYSE: ARCO) Started as Overweight at Morgan Stanley; started as Buy at Citi; Started as Neutral at JPMorgan.
Campbell Soup Company (NYSE: CPB) Raised to Neutral at Credit Suisse.
Carrizo Oil & Gas Inc. (NASDAQ: CRZO) Raised to Outperform at Wells Fargo.
Chimera Investment Corporation (NYSE: CIM) Cut to Hold at Jefferies.
Community Health Systems. Inc. (NYSE: CYH) Reinstated as Outperform with $35 target at Credit Suisse.
East West Bancorp, Inc. (NASDAQ: EWBC) Cut to Neutral with $21 target at Credit Suisse.
Energy Conversion Devices, Inc. (NASDAQ: ENER) Cut estimates and target to $1.50 at Credit Suisse.
Ferrellgas Partners (NYSE: FGP) Maintained Underperform as Bear of the Day at Zacks.
Hewlett-Packard Co. (NYSE: HPQ) Cut to Equal-Weight at Morgan Stanley.
Humana, Inc. (NYSE: HUM) Maintained Outperform as Bull of the Day at Zacks.
KBR INc. (NYSE: KBR) Added to Goldman Sachs Conviction Buy List.
Mosaic Co. (NYSE: MOS) Reinstated as Outperform with $85 target at Credit Suisse.
Mylan Laboratories Inc. (NASDAQ: MYL) Raised to Buy with $29 target at Argus.
Pan American Silver Corporation (NASDAQ: PAAS) Maintained Strong Buy as Value at Zacks.
Salesforce.com (NYSE: CRM) Raised to Overweight at Morgan Stanley.
Tenet Healthcare Corporation (NYSE: THC) Reinstated as Outperform with $7.50 target at Credit Suisse; Started as Neutral at BofA/ML.
Zipcar, Inc. (NASDAQ: ZIP) Started as Outperform with $30 target at Oppenheimer; Started as Neutral at Goldman Sachs.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: ARCO, CIM, CPB, CRM, CRZO, CYH, ENER, EWBC, FGP, HPQ, HUM, KBR, MOS, MYL, PAAS, THC, ZIP

Top Analyst Upgrades & Downgrades (AGCO, BP, COF, CRZO, CRDN, FSLR, GPN, MOTR, NDAQ, OAS, RSYS, WBSN)

Administrator — Wed, 28 Jul 2010 12:24:39 +0000

These are some of this Wednesday’s top analyst upgrades and downgrades seen from Wall Street research calls:

AGCO Corp. (NASDAQ: AGCO) Raised to Buy at Stifel Nicolaus.
BP plc (NYSE: BP) Raised Target (in U.K.) by Goldman Sachs; Raised to Outperform at Macquarie.
Capital One Financial Corp. (NYSE: COF) Started as Perform at Oppenheimer.
Carrizo Oil & Gas Inc. (NASDAQ: CRZO) Raised to Outperform at BMO.
Ceradyne Inc. (NASDAQ: CRDN) Raised to Buy at Needham.
First Solar Inc. (NASDAQ: FSLR) Maintained Buy but Raised Target to $173 at Auriga.
Global Payments Inc. (NYSE: GPN) Cut to Neutral at Janney Montgomery; Cut to Market Perform at Barrington Research.
Motricity, Inc. (NASDAQ: MOTR) Started as Buy at Needham.
NASDAQ OMX Group (NASDAQ: NDAQ) Raised to Buy at Stifel Nicolaus.
Oasis Petroleum Inc. (NYSE: OAS) Started as Buy at Canaccord; Started as Buy at UBS.
RadiSys Corporation (NASDAQ: RSYS) Cut to Hold at Jefferies.
WebSense, Inc. (NASDAQ: WBSN) Cut to Underweight at JPMorgan.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: AGCO, BP, COF, CRDN, CRZO, FSLR, GPN, MOTR, NDAQ, OAS, RSYS, WBSN

Natural Gas Producers Looks to Oil for Profits

247wallst — Tue, 13 Apr 2010 16:37:30 +0000

Companies that functioned primarily as natural gas producers have looked elsewhere for profits as the price of natural gas sticks around $4/thousand cubic feet. The development of tight shale plays, which yield very high production rates very quickly, has contributed to the low natural gas prices and the search for opportunities outside natural gas.

Some big players in natural gas, like Chesapeake Energy (CHK), Anadarko Petroleum (APC), and Devon Energy (DVN), have increased their focus on the Eagle Ford play in south Texas. Other smaller players like Carrizo Oil and Gas (CRZO), Cabot Oil and Gas (COG), and Saint Mary’s Land & Exploration (SM) have recently bought stakes in Eagle Ford as well.

One of the larger players, Petrohawk Energy (HK) announced today that it was reducing its investment in the Haynesville and Bossier shales in northern Louisiana, and putting more capital expenditures into its Eagle Ford acreage. The company also announced a new 50-50 joint venture with Kinder Morgan Energy Partners (KMP) that will result in the creation of a new entity, KinderHawk Field Services LLC, to own and operate the gas gathering and treating business owned by Petrohawk. Kinder Morgan is paying Petrohawk $875 million in cash for Kinder Morgan’s part of the venture. The transaction is expected to close by end of May 2010.

The joint venture’s assets include 173 miles of pipeline in service, and the mileage is expected to double to about 375 miles by the end of 2010. The system’s projected throughput is 800 million cubic feet/day. The amine treating plants that are part of Petrohawk’s system are also included in the deal and are expected to have a capacity of 2,635 gallons/minute by the end of this year. Ultimately the joint venture expects daily throughput of about 2 billion cubic feet/day of fee-based transportation.

Petrohawk said that it plans to cut its rig count 20% to 14 in the Haynesville shale, slash its 2010 capital expenditures by $100 million, and reallocate $175 million of its capex budget of $1.35 billion to the Eagle Ford play. Petrohawk plans to spend $850 million in the Haynesville shale this year, almost exactly the price Kinder Morgan agreed to pay for its share of the joint venture. Just coincidence?

Not hardly. The reduction in Petrohawk production out of Haynesville will be more than made up for by other players in the field. The joint venture plans to offer firm transportation services to third-party shippers, and it’s a lead-pipe cinch that the transportation charges will end up higher than the price Petrohawk was charging itself.

Kinder Morgan does not expect the joint venture to affect its planned 2010 distribution either positively or negatively. The company does expect to generate cash available to unitholders from the joint venture in 2011.

As noted, Petrohawk is primarily going after oil, not natural gas, at its Eagle Ford acreage. The company estimates that it holds 340 million barrels of risked resource potential in the Eagle Ford play. And that includes a conservative risk factor of 80% in the estimated ultimate recovery of oil and gas from the company’s acreage. None of Petrohawk’s other leases include oil or condensate, so it the company wants to juice up its profits, Eagle Ford is the place to do it.

Paul Ausick

Filed under: Oil & Gas Tagged: APC, CHK, COG, CRZO, DVN, KMP, SM

Top Analyst Downgrades (CRZO, COH, LDK, SYNA, SJM)

247wallst — Tue, 13 Oct 2009 11:47:49 +0000

These are this morning’s top analyst downgrades and cautious calls from Wall Street firms we have seen with about two hours until the market opens:

Carrizo Oil & Gas (CRZO) Cut to Neutral at SunTrust.
Coach (COH) Started as Neutral at UBS.
LDK Solar (LDK) Started as Underperform at BofA/Merrill Lynch.
Synaptics (SYNA) Cut to Underperform at Jefferies.
The J. M. Smucker Company (SJM) Started as Neutral at JPMorgan.

You can join our open email distribution list to get updates each morning on analyst upgrades and downgrades, top day trader alerts, IPO’s and secondary offerings, Warren Buffett and other guru activity, M&A and more.

JON C. OGG
OCTOBER 13, 2009

Posted in Analyst Calls Tagged: COH, CRZO, LDK, SJM, SYNA