Seeking Alpha

Concho Resources thinks big in Permian Basin race to the top

  • Concho Resources' (CXO) plan to double its oil production in three years wins Wall Street praise, though investors mostly greeted the news with a yawn as shares fell 1% in regular trading.
  • CXO aims to catch Diamondback Energy (FANG) and Pioneer Natural (PXD) in the race to become top producer in the Permian Basin.
  • Citi analysts reiterate that CXO is their top small and mid-cap oil and gas E&P company, setting a target price of $120 on the stock.
  • The plan is one the company is likely to deliver, Simmons analysts say, believing it should be "the primary focus for investors as it highlights a robust inventory of drilling locations" - adding that CXO's forecast 2014 production Y/Y gain of 18%-22% might prove a conservative estimate.
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Comments (1)
  • User 353732
    , contributor
    Comments (4966) | Send Message
     
    A target of $120 on a stock trading at $110 is hardly inspirational. Other analysts have a target closer to $140.

     

    Doubling production would mean a more than doubling of cash flow given the amortization of overhead over scale and continued reductions in capital and operating costs.

     

    The leading E&P companies today have to combine rapid volumetric growth with operational excellence.
    8 Nov 2013, 02:22 PM Reply Like
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