Jones Energy (JONE +9.6%) is upgraded to Buy from Hold with a $6 price target, doubled from $3, at Stifel, based on the company's exposure to the emerging southern extension of Oklahoma's prolific STACK play.
Stifel notes that Jones recently acquired 18M net acres in central Oklahoma that initially appeared to be located on the southern fringe of the STACK play, but activity is increasing in the immediate area, where nine rigs are currently operating compared to just five a month ago.
While the Woodford Shale is thinner in the extension area, the firm says better lateral targeting and improved completions are yielding early production rates that are comparable to the core of the play.
Jones Energy (NYSE:JONE) commenced its underwritten public offering of 14M shares of its Class A common stock. The underwriters will have an option to purchase up to an additional 2.1M shares of Class A common stock.
Jones also announced the launch of an underwritten public offering of 1M shares of its Series A Perpetual Convertible Preferred Stock at an issue price of $50 per share, subject to market conditions.
The company says it will use the net proceeds from the offerings to fund all or a portion of the acquisition of oil and gas properties located in the STACK/SCOOP play in Central Oklahoma.
Jones Energy (JONE -7.7%) is downgraded to Underweight from Equal Weight with a $3 price target, cut from $3.50, at Barclays, which believes the company would have to significantly improve its capital efficiency to justify its current premium.
Barclays calculates that JONE shares trade at 5.2x the firm's EV/2018 EBITDAX estimate compared with an average of 4.1x for a comparable group of companies.
The firm forecasts rising leverage ratios through 2017 as JONE's higher-priced oil and gas hedges roll off.
Jones Energy (JONE +2.4%) is upgraded to Outperform from Sector Perform with a $6 price target, hiked from $4, at Iberia Capital, which believes the company will be able to monetize its existing Cleveland play within 12 years, rather than the earlier expectation of 27 years.
The firm says JONE's plan to add three full-time drilling rigs leads to a doubling of Cleveland's undeveloped resource valuation to $440M from $220M.
With potential acquisition identified at 50K net acres, Iberia thinks JONE could “potentially double their location count at a cost of $25M. If successful, the addition would boost our NAV by $100M, or $2/share.”
Jones Energy (JONE +18.5%) is surging after reporting a slightly smaller than expected Q1 loss on a 55% Y/Y drop in revenues that nevertheless also beat expectations.
JONE raised its 2016 production guidance to 6.2M-6.8M boe, up from a prior outlook for 5.6M-6.2M, as well as its planned capex to $100M from earlier guidance of $25M
JONE also says it plans to resume drilling in the Cleveland play in western Oklahoma and the Texas panhandle, prompted by recent gains in commodity prices as well as cost savings within the company and "compelling" after-tax returns; it expects to have three rigs running by next month.