Southwestern Energy ( NYSE: SWN ) shares were upgraded Thursday to Buy from Neutral with an $8 price target at Citi, which also named the company as its top pick among gas-centric E&Ps, while reiterating Buy ratings for EQT ( EQT ) and Comstock Resources ( CRK ) and a Neutral rating for Range Resources ( RRC ).
For Southwestern ( SWN ), Citi's Paul Diamond cited the company's "relative operational flexibility" through geographic diversification, and he expects leverage and debt targets will be reached well ahead of schedule in spite of a conservative hedge book.
Opportunities for relative outperformance are driven by operational optionality between Haynesville and Appalachia, further efficiency gains and a relatively attractive free cash flow yield across pricing levels, Diamond said.
The analyst said EQT's ( EQT ) production growth will be limited, "but scale and operational efficiency gains continue to present opportunities for relative outperformance."
Comstock's ( CRK ) overall performance is strongly correlated to market pricing, so the bank's Buy recommendation is accompanied by a High Risk rating.
U.S. natural gas futures surged more than 10% Wednesday to a five-week high above $8/MMBtu .
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Southwestern Energy upgraded to Buy, top gas-focused E&P at Citi