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Clayton Williams Energy, Inc. (CWEI) is an independent energy company focused on oil and gas exploration and production. Total proved reserves at year-end 2007 were 290.8 Bcfe [billion cubic feet equivalent], 58% of which was oil and natural gas liquids.
We are upgrading the stock to Buy from Hold on valuation grounds following its steep commodity-price-induced pullback. Concerns about the company's levered balance sheet have also been at play in Clayton Williams stock's sell off in the current credit-constrained environment.
But we expect the company to able to fund its curtailed capital needs for next year through internal cash flows. After all, Clayton has a little more than half of its expected volumes next year hedged at fairly attractive prices.
We have lowered our estimates and price objective to reflect our new reduced price deck. Our new 2008/2009 EPS estimates are $9.39/$7.26, down from $11.39/$9.83. Our new NAV [net asset valuation]-based price objective is $77, down from $93 before.
Read the full analyst report on CWEI.
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