With a 12-month price target of $9.50, Zacks senior oil & gas analyst Sheraz Mian keeps his Buy rating on Grey Wolf (GW) shares. To find out why, we looked into his most recent report on the smaller-cap oil driller:
Grey Wolf reported strong first-quarter 2007 results, reflecting continued strength in its underlying business. While the growing entry of new-builds is exacerbating the market's supply-demand fundamentals -- as reflected in soft spot dayrates -- Grey Wolf is better positioned to meet this challenge with the help of its premium fleet and relatively stable term contracts.
We have reduced our earnings estimates to reflect reduced dayrate assumptions. Our Buy recommendation remains unchanged, as our medium to long-term onshore drilling outlook remains positive.
We continue to like Grey Wolf shares for its significant leverage to the still robust onshore drilling market despite the relative weakness in natural gas prices and its attractive valuation. While the stock has moved up some in recent days, it is still roughly 18% below its 52-week high and is trading at a significant discount to its peers.
Read the analyst report on GW