New Price Targets for CXO, FANG and XEC

[dan_s]

Devin McDermott – Morgan Stanley
March 21, 2019 4:05 AM GMT

We are updating price targets for CXO, FANG, and XEC based on updated reserves and inventory assumptions. Across our coverage, we use a 50/50 NAV/multiple based valuation approach.

CXO (at $108 this morning): PT to $133 from $135. Updated reserves and reduced target multiple half a turn to 6.5x based on slower growth rate compared to Permian peers. Remain OW.

FANG (at $105 this morning): PT to $144 from $154. Updated reserves and inventory assumptions negatively impacted NAV. Target multiple remains 7.5x. We continue to believe FANG is one of the highest quality names in the Permian. Remain OW.

XEC (at $71 this morning): PT to $96 from $101. NAV based valuation negatively impacted by updated inventory assumptions. We are remaining Overweight with XEC trading at 4.5x 2020e EV/EBITDA, a discount vs. peers at 5.8x.

NOTE: Morgan Stanley is using WTI oil price assumptions of $53.73/bbl for 2019, $54.63/bbl for 2020, $56.21/bbl for 2021 and $58.00/bbl for 2022 in all of their valuation models.