Stifel Morning Report

[dan_s]

PVA is a strong candidate for our Small-Cap Growth Portfolio. - Dan
Stifel Analyst:
Favorite names. With a focus on value names in the near-term, given the ongoing correction, our favorite names remain
EOG (Buy, $103.93) and APC (Buy, $105.89) on the large cap side and GPOR and PVA (Buy, $12.87) on the mid/small
cap side. Our best 2H14 growth idea remains PXD (Buy, $200.07), but with oil price weakness and a current 10.6x 2015E
EV/EBITDA multiple, we believe that this name could still face some additional pressure until oil prices find a base level.
EOG, with its free cash flow, ongoing strong returns in the Eagle Ford, and the Delaware Basin inventory firming up,
remains well-positioned, especially at 5.5x 2015E EV/EBITDA. APC, with its historic willingness to monetize assets, a
mineral ownership stake that we believe could be worth $15-$20/share, and production growth materializing in the
Niobrara, remains attractive at an adjusted 4.5x 2015 EBITDA, once adjusting for discovered non-producing assets.
GPOR, whose shares fell after reporting a CF miss and lower 2014 guidance with its 1Q14 results, is now seeing
production growth start to resume, based on its 3QTD production levels, and its typecurves are showing that its newer
completions are performing better versus previously drilled wells. Therefore, with quality Utica acreage, an underlying
NAV of $65/share and $109/share (1 and 3 year range), and production growth resuming, we believe this name is also
sitting at attractive levels. For PVA, we were concerned about 2Q results heading into earnings (see our July 11th 2Q
preview note) and the stock has sold off 12% with earnings. However, with attractive valuation (43% P/NAV; 3.7x 2015E
EV/EBITDA) providing some enticement, expectations for 2H volume growth acceleration and a pickup in Upper Eagle
Ford testing providing the potential drivers, and with an activist investor owning 8.4% of shares outstanding and publicly
pushing PVA to consider a sale providing a backstop option if management fails to deliver, PVA remains one of our
favorites.