ESTE Downgraded by RBC

[Roadster]

Earthstone Energy downgraded to Sector Perform from Outperform at RBC Capital

RBC Capital analyst Scott Hanold downgraded Earthstone Energy to Sector Perform from Outperform with a $21 price target. The rating change is a relative valuation call, Hanold tells investors in a research note. Management has been successful in building the scale of the enterprise through a series of acquisitive deals the last 18 months, but this makes the company potentially more susceptible to "cost creep" in the near-term as some acquired properties come with higher costs/potential integration risks, the analyst contends.

[dan_s]

ESTE is going to report very strong Q2 results, including a doubling of their production from 35,509 Boepd in Q1 to ~71,500 Boepd in Q2. The Titus Acquisition should close in early September, pushing production over 95,000 Boepd and the Company's exit rate should be ~100,000 Boepd.

$21.00 is a reasonable near-term price target, but if my 2023 forecast is anywhere close to their guidance for next year, the stock could be worth twice that much within a year.