eog & dnr

[setliff]

Lazard cuts ratings on EOG, KWK and others 09/16 11:34 AM

NEW YORK (MarketWatch) -- Lazard Capital Markets on Thursday downgraded four energy firms after it cut its 2011 oil price forecast to $75 a barrel from $80 a barrel. Analysts also believe 2011 natural gas prices will average about $4.50 per thousand British thermal units, verses its earlier view of $5. EOG Resources (EOG:$91.4300,$-0.1500,-0.16%) drew a downgrade to hold from buy, on concern that lower energy prices will make it difficult for it to deliver on its projected gains in production. Quicksilver was downgraded to sell from hold because its "premium valuation" is now unjustified in the face of its commodity forecasts. Denbury Resources (DNR:$15.7300,$-0.4500,-2.78%) was downgraded to hold from buy on lower oil prices and lack of major catalysts. Concho Resources (CXO:$64.0300,$-0.7700,-1.19%) drew a downgrade to hold from buy on lower oil price forecasts and high debt levels.

[setliff]

<on concern that lower energy prices will make it difficult for it to deliver on its projected gains in production.>

what a crock! $5 difference in crude does not even cover its trading range and is a pittance vs their growth plans, imo.

[SEIFER]

Agreed. Both are great buys at these prices longer term.

[bearcatbob]

Agreed. Both are great buys at these prices longer term.

Man EOG is tempting at this price level. Dan et al - is there any issue other than energy price causing the current share price issue?

Bob

[dan_s]

My EPS forecast for EOG is much higher than the current First Call estimates. EOG's cash flows are very strong and, more important, they should be reporting higher and higher production and reserves. As I have said many times, I'm not that concerned with earnings. I want companies with strong cash flows, strong Balance Sheets and strong production and reserve growth built in. EOG has all of the above plus one of the best engineering groups in the business.

They are on-track for 10% to 13% production growth in 2010 and production growth should accelerate in 2011.

It looks like a great BUY if you can get it under $90/share. EOG is one of our Core Holdings so my view is long-term on this one.

RISK: EOG has minimal hedges in place so they are more exposed to declining commodity prices than most. Of course that means they also have more upside if oil prices go up in 2011.

Dan