Approach Resources (AREX)

[dan_s]

I have updated my forecast model for AREX and posted it under the Watch List Tab. I rate it a BUY today based on valuation. I think it is oversold at today's price. Take a look at the 1 year chart. It has pulled back to this level several times this year only to bounce back to the upper $20s.

My Fair Value Estimate is $30/share, which compares to First Call's Price Target of $29.61. My forecast for Revenues, EPS and CFPS are now very close to what First Call is expecting.

Q3 production was 8,827 boepd (38.6% crude oil + 29.8% NGLs). Based on the company's guidance, I am forecasting 11,600 boepd for the 4th quarter as they bring on more high rate horizontal wells. Liquids should be a higher percentage of their production going forward.

AREX holds a lot of valuable acreage in the Permian Basin that has Wolfcamp potential. That is why I believe a high multiple of CFPS is justified. This is Prime Takeover Target IMO.