Madison Williams initiates coverage of US exploration, production industry

Andrew Coleman leads coverage, identifying investment opportunities among oil- and gas-weighted companies

NEW YORK, NY –  Madison Williams and Co., a New York-based integrated capital markets and investment banking firm, has initiated coverage of the US Exploration & Production Industry under senior equity research analyst Andrew Coleman.

Coleman’s research reports on investment opportunities among both oil-weighted and gas-weighted companies operating in the key resource plays in the US. Individual company coverage includes:

Gas-weighted companies:
• Cimarex Energy Co. (NYSE: XEC) – Buy rating
• Petrohawk Energy Corp. (NYSE: HK) – Buy rating
• Petroquest Energy Inc. (NYSE: PQ) – Buy rating
• QEP Resources Inc. (NYSE: QEP) – Neutral rating
• Ultra Petroleum Corp. (NYSE: UPL) – Neutral rating

Oil-weighted companies:
• Continental Resources Inc.(NYSE: CLR) – Buy rating
• Energy XXI Ltd. (NasdaqCM: EXXI) – Buy rating
• Brigham Exploration Co. (NasdaqGS: BEXP) – Neutral rating
• GeoResources Inc. (NasdaqGM: GEOI) – Neutral rating
• Oasis Petroleum Inc. (NYSE: OAS) – Neutral rating

Madison Williams’ top pick for oil-weighted E&P stocks is Continental Resources. Its top pick for gas-weighted companies is Cimarex Energy. The top catalyst-driven name Madison Williams covers is Energy XXI. Madison Williams believes Petrohawk Energy Corp. is the best positioned E&P to benefit from a rally in gas prices.

“Growth in liquids exposure remains a key theme. With the majority of US-based E&P companies weighted 70% or more to natural gas, taking advantage of pricing disparity toward natural gas liquids continues to lead E&Ps to process more of their gas,” said Coleman. “Every day is a day closer to gas rebalancing. Some two years on from gas prices peaking, we are still watching for production to roll over. Rig counts aren’t helping, as management teams continue to drill to hold acreage. But, given the growth of the natural gas liquids market, allocation of horizontal rigs to oil plays, a falling forward curve, and depressingly negative sentiment, maybe this time it will occur.”

One of the key findings is that it’s still a buyer’s market. Bigger exploration and production companies with access to capital and services seem the best positioned to quickly transform portfolios from gas to more liquids-rich ones. Thus, Madison Williams doesn’t see now as the time to buy smaller “beta” names. Smaller companies may still be attractive takeout candidates, but if asset buyers aren’t paying a lot for unbooked potential, companies wishing to sell need to generate positive operational results in order to facilitate their exit plans.

Coleman joined Madison Williams in May 2010 as managing director and Senior Exploration & Production Research Analyst. He recently relocated to the company’s Houston, Texas office.

Privately held Madison Williams was the capital markets business of Sanders Morris Harris Group (Nasdaq: SMHG) and was spun out in a management-led buyout in December 2009.

Source:  Madison Williams

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