eFinanceMarkets
7 years ago
Energen boosts production view, ends strategic review
Energen (EGN -4.1%) is lower despite raising its FY 2017 production outlook and ending its strategic review.
Citing the strength of results from wells completed with its Generation 3 frac design, EGN raises its total 2017 production estimate to 70.2K boe/day, or 5.9% higher than prior guidance, which would bring its Y/Y production growth to 29% vs. a prior outlook for a 21% gain.
Drilling and development capital spending guidance for the full year remains unchanged at $850M-$900M.
Citing the strong performance, EGN's board says continuing to execute its current business plan is the best path to enhancing shareholder value.
frenchee
16 years ago
Company Scores Very Good Fundamental Grades -
MarketGrader currently has a BUY rating on ENERGEN CORP (EGN), based on a final overall grade of 79.3 scored by the company's fundamental analysis. ENERGEN CORP scores at the 99th percentile among all 5272 U.S. listed equities currently followed by MarketGrader. Our present rating dates to December 17, 2005, when it was upgraded from a HOLD. Relative to the Gas Utilities sub-industry, which is comprised of 29 companies, ENERGEN CORP's grade of 79.3 ranks third. The industry grade leader is QUESTAR CORP (STR) with an overall grade of 81.0. The stock has performed poorly in the last six months in relative terms, down 14.98% compared with the Gas Utilities sub-industry, down 1.53% and the S&P 500 Index, down 3.3%.
frenchee
16 years ago
We forecast revenue growth of 8.2% this year.
We expect EGN to benefit from projected 14%
growth at its Energen Resources unit, helped by
higher realized prices. EGN's high level of
hedges locks in a good portion of its revenues
in 2008 and 2009.We see utility revenues rising
by 1% this year on customer growth and less
mild weather, offset by customer conservation.
ä Our 2008 operating profit margin forecast is
36.5%, up from 36.4% in 2007.We expect a drop
in per-revenue cost of gas, partly offset by a
slight increase in per-revenue operating taxes
and depreciation and depletion expense.We
expect that EGN will maintain control over
growth in other operating expense categories.
We see 2008 pretax margins of 33.6%, up from
33.2%, as we expect lower interest expense offset
by slightly lower non-operating income.
ä Assuming an effective tax rate of 36.4% and no
share repurchases, we project 2008 EPS of
$4.58, up 7.0% from 2007's $4.28. Our 2009 EPS
forecast is $5.23, an increase of 14%.
Investment Rationale/Risk
ä In our view, EGN continues to successfully execute
an exploration and production expansion
strategy backed by strong production hedges
and stable utility performance. EGN has hedges
covering 75% of remaining 2008 and 61% of
2009 production. EGN should continue to benefit
from high oil and gas prices.We think its
strong cash flows provide the company with
opportunities to grow through acquisitions and
development of long lived reserves, while funding
share repurchases and debt reductions.
ä Risks to our recommendation and target price
include prolonged declines in natural gas
prices, an inability to reduce debt levels, higher
interest rates, and a weakening financial condition.
ä The stock recently traded at about 11.9X our
2009 EPS estimate, or a 24% discount to its natural
gas utility peers. Our 12-month target price
of $81 implies a valuation of 15.4X our 2009 EPS
estimate, a 19% discount to our peer target. In
our view, EGN has a greater reliance on acquisition-
fueled growth, which we think is partly
offset by the EPS gains we see, the company's
proven hedging track record, and stable utility
results.
frenchee
16 years ago
RECOMMENDATION
We rate ENERGEN CORP (EGN) a BUY. This is driven by a few notable strengths, which we believe should
have a greater impact than any weaknesses, and should give investors a better performance opportunity than
most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth,
expanding profit margins and solid stock price performance. Although no company is perfect, currently we
do not see any significant weaknesses which are likely to detract from the generally positive outlook.
HIGHLIGHTS
EGN's revenue growth trails the industry average of 19.7%. Since the same quarter one year prior, revenues
slightly increased by 8.4%. This growth in revenue does not appear to have trickled down to the company's
bottom line, displayed by a decline in earnings per share.
ENERGEN CORP' earnings per share from the most recent quarter came in slightly below the year earlier
quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS
growth in the coming year. During the past fiscal year, ENERGEN CORP increased its bottom line by earning
$4.28 versus $3.72 in the prior year. This year, the market expects an improvement in earnings ($4.60 versus
$4.28).
47.20% is the gross profit margin for ENERGEN CORP which we consider to be strong. Regardless of EGN's
high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of
the gross profit margin, EGN's net profit margin of 19.60% significantly outperformed against the industry.
Compared to where it was trading a year ago, EGN's share price has not changed very much due to (a) the
relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and
(c) other mixed results. Turning our attention to the future direction of the stock, it goes without saying that
even the best stocks can fall in an overall down market. However, in any other environment, this stock still
has good upside potential despite the fact that it has already risen in the past year.
The change in net income from the same quarter one year ago has greatly exceeded that of the S&P 500, but
is less than that of the Gas Utilities industry average. The net income has decreased by 1.5% when compared
to the same quarter one year ago, dropping from $67.90 million to $66.88 million.
frenchee
17 years ago
MarketGrader currently has a BUY rating on ENERGEN CORP (EGN), based on a final overall grade of 80.2 scored by the company's fundamental analysis. ENERGEN CORP scores at the 99th percentile among all 5461 U.S. listed equities currently followed by MarketGrader. Our present rating dates to December 16, 2005, when it was upgraded from a HOLD. With an overall grade of 80.2, ENERGEN CORP is the highest graded company in the Gas Utilities sub-industry, followed by EQUITABLE RESOURCES INC (EQT), with an overall grade of 76.8. The stock, up 13.53% in the last six months, has outperformed both the Gas Utilities group, down 0.84% and the S&P 500 Index, which has returned 3.47% in the same period.
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