Energy Prospectus

Stifel morning report 4-22-2015

Raising Price Targets
We are raising our price targets for APC ($114 from $105), CXO ($141 from $134), MTDR ($31 from $27), NBL ($68 from
$65), SM ($77 from $55), and WLL ($49 from $45). Our new price targets assume these stocks achieve 65% (SM) to
100% (CXO and MTDR) of our NAV estimates.
Following an early recovery stage flight to quality, stocks of companies with the strongest assets and best balance sheets
are rapidly approaching full value. At this point in the cycle, we believe investors should be willing to accept greater risk in
order to find meaningful value. While the entire group should continue to benefit from an oil price recovery, our targets
imply the best risk/reward for PDCE, NBL, SM, and WLL.
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IMO the best values today in the Sweet 16 are: BTE, BCEI, DVN, GPOR, NFX and SM. Permian Basin has the best economics, which is why CXO, MTDR and XEC are getting lots of "love". Small-caps in the Permian that I like are LPI and CPE.

More from Stifel this morning:

Oil Rig Decline Setting Up Recovery
We anticipate a rebound in oil prices as U.S. supply growth slows, demand improves, and the dollar potentially tops and begins to weaken over the next 6 to 12 months. Last week, the number of U.S. rigs drilling for oil declined by 26 to 734. As such, the oil rig count has declined 54% from its October 10, 2014 peak of 1,609. A total of 502 rigs, or 52%, have been dropped from the Permian, Bakken, and Eagle Ford over this time frame.
We look for U.S. production growth to roll-over, albeit modestly, beginning in 2Q15. According to the EIA, January production of 9.185 MBls/d declined from December’s 9.320 MBls/d. The EIA forecasts volumes to peak in 2Q15 and recently revised its 1Q15 U.S. crude production estimate to 9.26 MBls/d from 9.35 MBls/d, roughly in-line with our unchanged 9.25 MBls/d forecast.

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I believe U.S. oil production is declining today AND that the rate of decline will accelerate faster than most analysts are expecting during the second half of this year. I think we will see months where U.S. oil production declines by more than 200,000 bbls per day. I also think month-after-month we will see IEA raising the demand forecast. - Dan