Energy Finance

To reflect changing market conditions, Calyon Securities is adjusting its valuation methodology and now bases all target prices on a blend of 50% of net asset value and 2009 estimates of EV/EBITDAX ratio, which have been trimmed by 25% to 35%.

In coordination with Calyone’s head of oil and gas research, Hernan Ladeuix, it is lowering its oil and gas price forecasts for 2009 to $71.50 per oil barrel and $7.50 per million Btu, down from $96.50 and $8.00.

“We believe investors should focus on well-capitalized gas-levered names with strong balance sheets,” says Calyon’s Jeb Armstrong. “On average, we are lowering target prices by 49%.”

Due to liquidity concerns surrounding production deferred after Gustav and Ike, Calyon now bases valuation of ATP Oil & Gas exclusively on proved reserves. “We are lowering our ATPG target price from $56 to $16.”

“We are raising our ratings on two stocks based on valuation. We are upgrading WTI to ADD from NEUTRAL and ME to BUY from ADD. Both have a Gulf of Mexico focus and have seen their stocks get pummeled by the deterioration of the overall market and September’s hurricanes,” says Armstrong.

“In coordination with today’s note by Hernan Ladeuix, we are lowering our 2009 and long-term commodity price forecasts, which are incorporated into our new target prices. Worsening economic conditions, both in the U.S. and abroad, are the primary reasons. The U.S. is experiencing the worst demand decline in crude oil in more than 20 years,” he says.

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