Cimarex: A Natural Gas Play for Risk-Tolerant Investors

Remembering 1982, 1987, and 2002, we believe the appropriate action for risk-tolerant, long-term investors is to buy rather than sell after a steep stock market decline as has just occurred on September 29, 2008. In keeping with that sentiment, we restore our buy recommendation of small-cap natural gas producer, Cimarex Energy (XEC).

The low-debt driller joins five other current buy recommendations and boosts natural gas exposure for the combination. At the same time we acknowledge the prevalent fear that the widespread financial failures are likely to have a slowing effect on economic activity and on oil and gas demand. Countering that deflationary effect is the eventual inflationary consequence of government support of weak financial players.

Though it could be challenged under unfolding circumstances, we remain comfortable with a long-term oil price of $100 a barrel for estimating Present Value (PV). In any event, McDep Ratios that compare Market Cap and Debt to PV range from 0.46 to 0.57 for buy recommendations.

Originally published on September 30, 2008.

Comments

[NOWHEREMAN:]

QBC, In the middle of it all, pure play in Haynesville.

EXXI, look at the projections for earnings on MSN.COM's Stockscouter.

2008 Oct 20 09:29 PM