NBL and DVN

[dan_s]

CSLA initiated coverage of Noble Energy (NBL) today with an "outperform" rating and a $42 target price. [My valuation of NBL is $44.50. - Dan]

CSLA also initiated coverage of Devon Energy (DVN) an "outperform" rating and $41 price target. [My valuation of DVN is $56.00. - Dan]
The firm said Devon's management is on track to refocus the company with $2 billion of divestitures already announced "We see strong emerging tailwinds...1) Oil market rebalancing is well underway; 2) we see continuing benefits from cost/efficiency/technology gains (>20% improvement); and 3) strong cashflow growth emerging in 2017/18," the firm wrote in an analyst note.

"While we are likely at the cusp of multi-year outperformance, we do note that the 'hangover effect' (continuing debt and growth headwinds) is expected to continue over the next six months, as the industry continues to reset following a period of unprecedented hyper-growth and lack of capital discipline," CLSA added.

I believe their is significant upside to my valuation of Devon Energy. All of the leasehold that MRO is acquiring from Payrock in the STACK is dedicated to EnLink.
Devon holds the controlling interest in EnLink Midstream Partners, LP (NYSE: ENLK). Devon owns approximately 64% of the general partner interest and 25% of the limited partner interest. EnLink’s P&L is consolidated with Devon’s reported results. I’ve estimated that Devon’s interest in EnLink has a market value of more than $3 Billion. Cash distributions from EnLink to Devon are estimated at approximately $270 million for 2016. < An aggressive drilling program by MRO should significantly increase EnLink's cash flows.