We are maintaining our Buy recommendation on Casper, Wyoming-based Double Eagle Petroleum Co. (DBLE), a small-cap exploration and production (E&P) company, following the company's strong third-quarter results, with volumes up roughly 150% from the year-earlier level.
We continue to believe that Double Eagle's low-risk reserves base and significant near-term production growth from the Atlantic Rim are undervalued. With production from the Catalina unit continuing to exceed our expectations, we see tremendous upside in this high growth story.
We project that Double Eagle will have sufficient funds to take care of its development needs next year. Natural gas prices in the Rockies remain the major risk factor. We view our new NAV [net asset valuation] calculation based on our updated commodity-price deck to be the more conservative approach. Contrary to general street practice and the requirements of the SEC PV-10, we use after-tax cash flows in our NAV model. We believe that stocks should trade at a premium to such conservatively constructed NAV estimates. Our price objective, however, is at 100% of our NAV estimate.
Neil Malkin contributed to the report.
Read the full analyst report on DBLE
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