Friday, FBR Capital Markets initiated coverage of Plains Exploration & Production Co. (PXP) stock with an Outperform rating and a price target of $40.
Analyst Rehan Rashid initiated the stock at Outperform with a 12-month price target of $40.00 per share, based on the stock trading at 70% of his before-tax risked 3P net asset value, or NAV, of $56.00 per share and 8.5x 2010 EV/DACF. The analyst's NAV assumes $4.50/Mcf long term and a 15% discount rate.
The analyst's Outperform rating reflects his belief that management has positioned the company to harvest stable cash flows from oil-based production (60% by volume) and shale gas from the Haynesville shale with Chesapeake Energy Corp. (CHK) as a joint venture operator.
The analyst said that an added upside is the risked exploratory option of $6.00 per share in the deepwater Gulf of Mexico, or GOM, from three near-term drilling prospects, two of which are in the Lower Tertiary.
Currently, PXP is down $0.22 or 0.74% and trading at $29.61.
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