The top analyst research calls of the week were as follows: Bank of America Corporation (NYSE: BAC); Brocade Communications Systems, Inc. (NASDAQ: BRCD); Dendreon Corporation (NASDAQ: DNDN); Dollar General Corporation (NYSE: DG); LinkedIn Corporation (NYSE: LNKD); Petrohawk Energy Corporation (NYSE: HK); Potash Corp. of Saskatchewan (NYSE: POT); RadioShack Corporation (NYSE: RSH); SanDisk Corporation (NASDAQ: SNDK); and Symantec Corporation (NASDAQ: SYMC).  We also highlighted some other key research calls which may have gotten lost in the market shuffle this week as follows: McDonald’s Corporation (NYSE: MCD); Teva Pharmaceutical Industries Limited (NASDAQ: TEVA); TravelCenters of America LLC (AMEX: TA); Wal-Mart Stores Inc. (NYSE: WMT); and Yahoo! Inc. (NASDAQ: YHOO).

Each call has been shown in the research summery along with a price target, and color or background data has been added if applicable.

The first measure is one we had already assumed was coming sooner or later.  The S&P downgrade of the United States to “AA+” from “AAA.”  Earlier this week we handicapped the other Triple-A nations and pointed to the other countries that would soon be at-risk as well.  Warren Buffett has chimed in noting that the impact should be limited.

Bank of America Corporation (NYSE: BAC) was an interesting downgrade on Friday, where Wells Fargo cut its rating to Cut to Market Perform from Outperform.  It just could not take the pain any longer.  As a reminder, our own theory is that one big bank upgrades or downgrades a rival bank they are really issuing the same call on their own bank.  S&P Equity Research also cut its rating on BoFA on Friday to Hold from “Strong Buy.”  Whoops! BofA was as high as $10.05 on Monday, but shares closed down at $8.17 on Friday.

Brocade Communications Systems, Inc. (NASDAQ: BRCD) tanked some 28% on Friday to hit a new 52-week low of $3.52 at the closing price but hitting $3.28 during the trading day.  Janney Capital threw in the towel and cut the rating to “Neutral” from “Buy.”  This is just one more bull losing faith and now the hope of a buyout cannot occur for quite some time.

Dendreon Corporation (NASDAQ: DNDN) was the unexpected implosion of the week.  Had it not been for a deadly stock market, this would have garnered far more media coverage as the biotech disappointment of the year.  The news caught us off guard and it caught almost all of the analyst community as you can see with this whole spread of analyst downgrades in unison.  By the way, some solid applause should be given to Credit Suisse since it has been very negative all along on this one.

Dollar General Corporation (NYSE: DG) has more than 30% upside if BMO is correct.  It started coverage of the king of dollar stores as Outperform with a $40.00 price target.  This is one of our ten stocks to own for the next decade, but we would note that the consensus target from Thomson Reuters is currently about $37.25 but the $40 target is still well short of the $49.00 ‘street high’ target out there.

LinkedIn Corporation (NYSE: LNKD) lost one more of its bullish cheerleaders.  Morgan Stanley cut its rating to “Equal Weight” from Overweight due to just how realistic a $9 billion valuation is whether it has grown 20% more in a short period of time or not.  This downgrade came after the online social networking site for business beat earnings and said sales had more than doubled.  Morgan Stanley was one of the book-runners of the LinkedIn IPO.

Petrohawk Energy Corporation (NYSE: HK) has lost one of its bullish firms after one massive rally.  Petrohawk is in the process of being acquired by BHP for about $12.1 billion, but some investors have said they think it is worth more.  Credit Suisse does not think so as it cut the rating to “Neutral” from “Outperform.”  In short, “Take your money and run” is what they are saying after nearly a 200% rise in the last year due to the buyout.

The Andersons, Inc. (NASDAQ: ANDE) Maintained Buy as Value at Zacks.
Apollo Investment Corporation (NASDAQ: AINV) Cut to Neutral at JPMorgan.
Applied Materials Inc. (NASDAQ: AMAT) Started as Perform at Oppenheimer.
Bank of America Corporation (NYSE: BAC) Cut to Market Perform at Wells Fargo.
Boyd Gaming Corp. (NYSE: BYD) Raised to Neutral at Goldman Sachs.
Coinstar Inc. (NASDAQ: CSTR) Raised to Neutral at JPMorgan.
Exterran Holdings, Inc. (NYSE: EXH) Cut to Neutral at Credit Suisse.
First Solar Inc. (NASDAQ: FSLR) Cut to Hold at ThinkEquity.
Health Management Associates Inc. (NYSE: HMA) Cut to Hold at Argus.
KLA-Tencor Corporation (NASDAQ: KLAC) Started as Outperform at Oppenheimer.
LinkedIn Corporation (NYSE: LNKD) Cut to Equal Weight at Morgan Stanley.
Micron Technology Inc. (NASDAQ: MU) Started as Perform at Oppenheimer.
Potash Corp. of Saskatchewan (NYSE: POT) Raised to Outperform at Bull of the Day at Zacks.
Petrohawk Energy Corporation (NYSE: HK) Cut to Neutral at Credit Suisse.
Royal Caribbean Cruises (NYSE: RCL) Maintained Underperform as Bear of the Day at Zacks.
SanDisk Corporation (NASDAQ: SNDK) Started as Outperform at Oppenheimer.
Salesforce.com (NYSE: CRM) Raised to Outperform at Wells Fargo.
Symantec Corporation (NASDAQ: SYMC) Raised to Outperform at FBR.
VMware Inc. (NYSE: VMW) Raised to Outperform at Wells Fargo.

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

Petrohawk also sold $650 million in Fayetteville assets to Exxon Mobil Corp. (NYSE: XOM) earlier this year. Petrohawk is tightly focused on the Eagle Ford shale gas play in south Texas. Its leaseholds in Texas and Louisiana total about 1 million net acres. At the end of 2010, the company held proved reserves of 3.1 trillion cubic feet of natural gas equivalent, 20 million barrels of oil, and 27 million barrels of natural gas liquids, mostly in the Eagle Ford and Haynesville plays.

Because natural gas prices are so low it’s always a bit of a surprise when a deal like this gets done. But it shouldn’t be. Those millions of barrels of oil and liquids are the real value of these deals in the short term. BHP is paying about $2.54/barrel of oil equivalent for Petrohawk, which is less than the $2.79/barrel it paid for the Chesapeake properties it acquired earlier this year.

In May we did a story on good values in energy stocks, and Petrohawk was one of the companies on that list. We noted the company’s high trailing P/E and its strong forward P/E, but we also pointed out that Petrohawk was a good candidate for a takeover — even at a market cap then of about $8 billion.

BHP’s record on acquisitions has been spotty this year. Its $39 billion offer for Potash Corp. of Saskatchewan (NYSE: POT) was eventually withdrawn just before the Canadian government would have killed the deal. Provided Petrohawk shareholders go along with the deal and it passes muster with regulators, the acquisition of Petrohawk is a good move for BHP.

Another winner from this deal might be the First Trust ISE-Revere Natural Gas Index Fund (NYSE: FCG), which includes Petrohawk as its second-largest holding at slightly more than 4% of assets.

Petrohawk’s shares are up nearly 64% in pre-market trading, to $38.49, way above the top of their 52-week range of $14.32-$27.45. BHP’s share price is down about -1.5%, at $90.90, in a 52-week range of $64.14-$104.59.

Paul Ausick

Energy Transfer Equity, L.P. (NYSE: ETE) and Southern Union Co. (NYSE: SUG ) announced today that the two companies have entered a definitive merger agreement wherein Energy Transfer Equity will acquire Southern Union for $7.9 billion.  The transaction price includes transfer of Southern Union’s debt of $3.7 billion to the combined company.  The merger gives rise to an integrated midstream company in the natural gas industry.

Unanimously approved by the Boards of Directors of both companies, the merger agreement calls for Southern Union stockholders to receive newly issued Series B Units of Energy Transfer Equity at $33.00 per share, approximately $4.2 billion, in exchange for Southern Union common shares.

Southern Union’s common shares closed at $28.26 on Wednesday, June 15, 2011.  Accordingly, the implied $33.00 value of ETE’s Series B Units reflects a 17 percent premium over Southern Union’s closing price. The Series B Units will list on the NYSE and, at $33 per share, are expected to receive an annualized of 8.25% or better.

Exxon Mobil Corporation (NYSE: XOM) stunned the markets when the integrated oil giant made an all-stock acquisition of XTO for some $41 billion.  A deal from Chesapeake Energy Corp. (NYSE: CHK) where it acquired Bronco Drilling was hardly a footnote in size.  Temasek Holdings Limited, RRJ Capital and Chesapeake Energy Corp. (NYSE: CHK) also signed an agreement to acquire 74.2% stake in Frac Tech Services, LLC from the founders in what was called a recapitalization transaction earlier this year. And Chevron Corporation (NYSE: CVX) made an acquisition of Atlas in 2010.

One company that remains independent and has been speculated as a buyout candidate before is Petrohawk Energy Corporation (NYSE: HK).  It has a market capitalization of $7.26 billion and at $23.91 it has a 52-week range of $14.32 to $27.45.

For a source of energy that is currently not so friendly to natural gas, it is amazing to see so many mergers.  What is obvious is that the trend points to natural gas whether it is popular today or not.

JON C. OGG

Natural gas prices at the Henry Hub have been rising, coming within a hair’s breadth of $5.00/million BTUs, a level last seen in August 2010. The low prices have slowed the growth in onshore drilling for natural gas in the US, at the same time that it is encouraging some utilities to look at natural gas as a fuel for baseload power generation.

The abundant supplies of US natural gas available throughout the drilling technique known as hydraulic fracturing, or ‘fracking’ or ‘fracing’, has swept the industry, leading to massive amounts of new gas discoveries and production, as well as to lower prices. The industry needs prices to rise to around $7-$8/million BTUs in order for it to make a decent profit, but with prices stuck below $5, that day appears to be well into the future.

Investing in natural gas purely as a commodity play is best left to experienced traders. There are, of course, other ways. Four funds we’ll look at here are United States Natural Gas Fund (NYSE: UNG), First Trust ISE-Revere Natural Gas Index Fund (NYSE: FCG), SPDR S&P Oil & Gas Exploration and Production (NYSE: XOP), and PowerShares Dynamic Oil & Gas Services Fund (NYSE: PXJ).

United States Natural Gas Fund (NYSE: UNG) invests in near-month natural gas NYMEX futures contracts. In the past 52-weeks, the fund has lost more than -25% of its NAV, but with $1.9 billion in assets it is the largest natural gas fund available. Because it invests only in near-month contracts, UNG must roll-over its contracts every month, in effect selling its about-to-expire position and purchasing new contracts for the following month. In a contango market, where future-month contract prices exceed near-month contract prices, such a strategy loses money every month. Thus, even when natural gas prices rise, UNG can lose money because the future contract price will rise at least as quickly as the current price.

Why own such a thing? Primarily as a hedge against inflation and almost no correlation with equity prices. Pretty small beer, all things considered. UNG is trading at $11.93 at about mid-day, within a 52-week range of $10.02-$17.68.

The First Trust ISE-Revere Natural Gas Index Fund (NYSE: FCG) tries to replicate the ISE-Revere Natural Gas Index by investing at least 90% of its funds in the common stock of that index’s companies. The fund’s top five holdings are Stone Energy Corp. (NYSE: SGY), Petrohawk Energy Corp. (NYSE: HK), Cabot Oil & Gas Corp. (NYSE: COG), Southwestern Energy Co. (NYSE: SWN), and SandRidge Energy, Inc. (NYSE: SD). These five comprise 18.95% of the fund’s holdings. The fund’s assets total $586 million and it is trading today at $21.19, within a 52-week range of $14.39-$23.75. In the past year, the fund has gained more than 30%.

The SPDR S&P Oil & Gas Exploration and Production (NYSE: XOP) invests in equities  of companies that explore for and produce oil and natural gas. The fund’s top five holdings are Cabot, W&T Offshore, Inc. (NYSE: WTI), Petrohawk, EQT Corp. (NYSE: EQT), and Southwestern Energy. The fund’s assets total $908 million. The fund is trading at $56.55 today, within a 52-week range of $37.44-$65.76. Over the past year, the fund has gained about 42%.

The PowerShares Dynamic Oil & Gas Services Fund (NYSE: PXJ) tracks an equity index called the Dynamic Oil Services Intellidex. It invests at least 80% in common stock of oil and gas services companies, and may invest up to 90% of its assets in the Intellidex index companies. Its five largest holdings are Baker Hughes Inc. (NYSE: BHI), Nabors Industries, Ltd. (NYSE: NBR), Halliburton Co. (NYSE: HAL), FMC Technologies, Inc. (NYSE: FTI), and Diamond Offshore Drilling, Inc. (NYSE: DO). The fund’s assets total about $247 million and it is trading today at $23.35, in a 52-week range of $13.98-$26.84. The fund has gained about 66% in the past year.

A reasonable conclusion from this quick survey is that investing in natural gas producers pays off nicely, but the real gains have come in the services sector. Holding natural gas futures has very limited appeal, but plenty of investors do it.

Growth in the services sector is likely to continue as drilling picks up both onshore in the US and offshore in the US Gulf of Mexico. As for the producers, Cabot, Stone, and Petrohawk are all involved in natural gas plays that produce significant amounts of liquids. And that’s where the money is, not in gas. Gas may become worth more over the next year or so, but the price differential between liquids and gas is never likely to close again.

Paul Ausick

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

Chesapeake had already sold a 25% stake in its Fayetteville play to BP for $1.9 billion. The company had also sold all its assets in the Arkoma basin and 20% of its assets in the Haynesville shale play to Plains Exploration & Production Co. (NYSE: PXP) for $1.65 billion. Chesapeake has also struck a five-year volumetric production agreement with Barclays Bank PLC (NYSE: BCS) that pulled in another $1.15 billion. Those deals siphoned off about 1 trillion cubic feet of production. China’s Cnooc Ltd. (NYSE: CEO) bought a 33% stake in Chesapeake’s Eagle Ford shale play for $1.08 billion late last year.

And Chesapeake’s not alone. Exxon Mobil Corp. (NYSE: XOM) paid $650 million to Petrohawk Energy Corp. (NYSE: HK) for Petrohawk’s Fayetteville assets.

With natural gas prices once again below $4/thousand cubic feet, the wonder is that anyone would acquire more natural gas reserves. BHP bought into the Fayetteville because the asset adds more than 10 trillion cubic feet of hydrocarbons to the company’s reserves base. Chesapeake was willing to sell because it would rather drill in either the Haynesville or Eagle Ford plays, where there is a larger percentage of higher-profit natural gas liquids.

It could be argued that BHP is looking for ways to spend its cash hoard. After failing to get control of Potash Corp. of Saskatchewan (NYSE: POT) for a deal valued at nearly $39 billion, BHP shareholders have been clamoring for increased payouts. The company has raised its stock buyback program to a total of $10 billion, but would like to do something with the cash that beefs up the company’s long-term prospects.

Chesapeake’s shares have set a new 52-week high this morning, giving the shares a range of $19.62-$32.61. That’s great for shareholders, but remember that less than three years ago Chesapeake shares topped out at around $67. Even if the company is able to chop its debt, which is still around $11 billion, the price it will have to pay to do so could put that $67 share price in the rear-view mirror for good.

Paul Ausick

Activision Blizzard, Inc. (NASDAQ: ATVI) Cut to Neutral at BofA/ML.
Anadarko Petroleum Corp. (NYSE: APC) Raised to Buy at Canaccord Genuity.
The Blackstone Group L.P. (NYSE: BX) Started as Outperform with $20 target at Credit Suisse.
Dollar General Corporation (NYSE: DG) Cut to Hold at Deutsche Bank.
Dollar Tree, Inc. (NASDAQ: DLTR) Cut to Neutral at Piper Jaffray.
Electronic Arts Inc. (NASDAQ: ERTS) Raised to Overweight at Piper Jaffray.
Hexcel Corporation (NYSE: HXL) Raised to Buy at BofA/ML.
Kennametal Inc. (NYSE: KMT) Cut to Neutral at BofA/ML.
Marsh & McLennan Companies, Inc. (NYSE: MMC) Started as Hold at Deutsche Bank.
Nuance Communications, Inc. (NASDAQ: NUAN) Cut to Sell at Goldman Sachs.
Orexigen Therapeutics, Inc. (NASDAQ: OREX) Cut to Hold at Jefferies.
Petrohawk Energy Corporation (NYSE: HK) Cut to Market Perform at BMO; Raised to Buy at SunTrust.
Pfizer Inc. (NYSE: PFE) Raised to Outperform at BMO.
Plexus Corporation (NASDAQ: PLXS) Cut to Underperform and called the Bear of the Day at Zacks Investment Research.
Qualcomm, Inc. (NASDAQ: QCOM) Raised to Outperform and called the Bull of the Day by Zacks Investment Research.
Walgreen Co. (NYSE: WAG) Raised to Hold at Citigroup.
Wal-Mart Stores, Inc. (NYSE: WMT) Cut to Hold at Deutsche Bank.

You can 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

Hydraulic fracturing, or ‘fracking’, is a technique that drillers use to fracture the tightly structured rock surrounding natural gas deposits. To accomplish this, drillers force a proprietary soup composed of water, sand, and chemicals into the surrounding rock causing it to crack and allowing the gas to flow out. But the composition of the fracking fluids is now under scrutiny, following charges that gas drillers are fouling local drinking water supplies.

This could turn into very bad news for producers like Exxon Mobil Corp. (NYSE: XOM), Chesapeake Energy Corp. (NYSE: CHK), Petrohawk Energy Corp. (NYSE: HK), Range Resources Corp. (NYSE: RRC), EXCO Resources, Inc. (NYSE: XCO), and SM Energy Corp. (NYSE: SM; formerly St. Mary Land and Exploration Co.). Oil field services firms could also feel the pinch. Two of the largest fracking fluid providers are Halliburton Co. (NYSE: HAL) and Schlumberger Ltd. (NYSE: SLB).

A committee of the US House of Representatives has notified the US EPA that “tens of millions of gallons of diesel fuel” has been injected into onshore gas wells, according to The New York Times. Diesel fuel has been commonly used as part of a driller’s fracking fluid, though both Halliburton and Schlumberger signed an agreement with the EPA in 2003 to “curtail” using diesel fuel in certain situations. When the Energy Policy Act of 2005 was passed, it included specific language exempting regulation of any sort on the fracking fluid, including the use of diesel fuel in the mixture.

The $64 question is whether or not the EPA will attempt to prosecute drillers under the Safe Drinking Water Act of 1974. The industry will fight any attempt by the agency to fine drillers for using diesel fuel in fracking in the past.

If the EPA chooses to levy fines against drillers, the industry will certainly take the matter to court, and may ultimately win. However, in the meantime, does drilling for shale gas slow down, or stop altogether?

Here’s where it gets tricky for producers. If they don’t continue to develop their leases, those leases could be lost. That, in turn, diminishes a company’s prospects, and could lead to a fall in share prices. If they try to continue drilling, they could face even larger penalties.

A more severe hit could come from the way production companies calculate their proved reserves, which is the measure that most investors use to determine the value of a company. If the EPA bans some chemicals, including diesel fuel, from being used in fracking fluids, drillers will have to get reformulated fluids tested and mixed before using them. And they might not work as well, which would force companies to re-calculate their proved reserves. That could really hurt.

Liability for past diesel fuel use, possible loss of leases if EPA intervenes, and possible lowering of proved reserves combine to make shale gas drilling a riskier business today than it was yesterday. It could take years to resolve all the issues, but one of these ought to be at the forefront: does the US continue to extract shale gas even if doing so means the country is poisoning its own people?

Paul Ausick

Exxon’s share price is increasing primarily as a result of the rising price of crude oil, and the rising share prices of Chevron Corp. (NYSE: CVX), ConocoPhillips Corp. (NYSE: COP), and Royal Dutch Shell plc (NYSE: RDS-A) are following the same path. BP plc (NYSE: BP) shares benefit as well plus the added benefit that comes from seeing an upper limit to the costs it will have to pay for the explosion of its well in the Gulf.

But depending on the rising price of crude doesn’t equal a business model, and Exxon knows that. That’s why the company is spending on acquisitions like XTO Energy and other oil and natural gas assets that it can add to its proved reserves. Likewise, it must sell or close underperformers.

Exxon recently announced that it would sell its stakes in two North Sea gas fields that it acquired with XTO. The company says they won’t be able to generate large enough returns to have a positive impact on Exxon’s profits. And the company probably has plenty more assets like that, both in oil and gas fields.

Rather than just selling low-performing assets, Exxon is also taking advantage of other opportunities. In Malaysia, the company has said it will invest put up about two-thirds of a $4.9 billion investment with Shell in Malaysia to raise that country’s oil production back to the levels of the 1990s. In addition to new projects, about a third of the Exxon/Shell investment will go to enhanced oil recovery projects. And Exxon expects to invest more with Malaysia’s national oil company, Petronas, on other enhanced recovery projects. Because Exxon’s projects in Malaysia include several production sharing contracts, this investment is a good way to post growth because it both boosts barrels of reserves and takes advantage of rising prices.

Exxon is also one of three bidders to replace Conoco in the Shah natural gas project being led by Abu Dhabi National Oil Co., usually called Adnoc. The competitors are Shell and Occidental Petroleum Corp. (NYSE: OXY). The project is still on target for completion in 2014, and expects to process 1 billion cubic feet/day of natural gas.

The company has also recently completed a third well in the Santos Basin offshore of Brazil. Exxon is the operator of the wells, and owns a 40% stake in the block. This deal was made before the government of Brazil passed laws restricting majority ownership of the country’s oil resources.

Exxon has also recently sent an exploration rig through the Hesperus to explore in the Black Sea, part of a partnership with Turkey’s national oil company. On the downside, the company’s LNG plant in Indonesia is suffering from a decline in output and is scheduled to close in 2014.

In the US, Exxon paid $650 million in December to Petrohawk Energy Corp. (NYSE: HK) for that company’s Fayetteville shale assets in Arkansas. This gives the energy giant another play in the shale gas bonanza, and is a relatively small bet that natural gas prices will rise throughout 2011.

Exxon needs to focus on growth, and it takes it wherever it can get it. And it needs big deals, like the XTO acquisition, to move the needle. Unfortunately, there aren’t many of those around. The company will buy and sell assets ruthlessly anywhere in the world as it searches for growth.

Exxon’s shares are trading about -0.5% early this morning on news that crude prices are falling in response to the latest US unemployment claims report. The company also posted a new 52-week high this morning of $76.82. The company’s median price target is $77, though the latest take from Barclays Capital raised Exxon’s price target to $85/share even though the stock was downgraded from ‘Outperform’ to ‘Market Perform’.

Paul Ausick