Carrizo Oil & Gas Price Target $ 34

Rectangular joints in siltstone and black shal...
Rectangular joints in siltstone and black shale within the Utica Shale (Ordovician) near Fort Plain, New York. (Photo credit: Wikipedia)

CRZO : NASDAQ : US$22.58
Target: US$34.00

Carrizo is an E&P company with operating areas in the Barnett Shale, Marcellus Shale, Eagle Ford ShaleNiobrara Shale and U.K. North Sea.

Investment thesis

We lowered our target price $1 to $34 per share due to a slightly higherNGL composition. Notably, our target price includes a value of $20K per
acre for the company’s Utica Shale leasehold in Guernsey County. Early this year, Carrizo exercised its option to increase its leasehold in the Utica play to 17,000 net acres; approximately 50% of the acreage is in highly prospective Guernsey County. The company plans to drill its first  Utica test in Guernsey County this summer.
Eagle Ford/Niobrara drive expected oil production outperformance In ’13, our oil/liquids growth outlook is ~38%, which is ~10% above
guidance (28%) underpinned by ongoing development in the Eagle Ford and Niobrara plays. Carrizo is conducting a three-rig program in the
Eagle Ford and two-rig program in the Niobrara. The company has generated competitive/consistent results across both plays.
Sale of North Sea lowers net debt-to-EBITDA to critical 3x threshold The recent sale of the Huntington field along with a series of minor liquidity events in the fourth quarter lowered the company’s net debt-to- EBITDA from 3.7x to 3x. Importantly, Carrizo is on a path to further lower net debt-to-EBITDA below 3x in future years. Additionally, the company has revolver financing visibility into late ’14 conservatively assuming the current bank borrowing base.
Almost $600 million in financial liquidity generated since September Last September, the company issued $300 million of term debt. After
accounting for the term debt, Carrizo’s bank line actually increased by $40 million due to the company’s oil production growth. Additionally,
the company generated ~$130 million in cash proceeds through two JVs in the Niobrara Shale and the sale of non-core Gulf Coast and Utica
Shale assets. Combined with the North Sea sale, these transactions increased the company’s financial liquidity by ~$590 million.

American Tower Corp. Q4 Solid Outlook

English: American Tower "Sumpter" wi...
English: American Tower “Sumpter” wireless tower #87830, 45700 Dunn Road, Belleville (Sumpter Township), Michigan. source of information: (Photo credit: Wikipedia)

AMT : NYSE : US$75.51
Target: US$88.00

American Tower Corporation is a wireless and broadcast communications infrastructure company that owns, operates and develops communications sites. Headquartered in Boston, MA, the company began operating as a REIT for federal income tax purposes
effective Jan. 1, 2012.

Investment recommendation

American Tower reported solid Q4/12 results with solid 2013 guidance that we believe is traditionally conservative. With 4G amendment and
new site activity kicking into high gear and unfounded fears of a broader slowdown, we believe the recent relative underperformance has created
a buying opportunity. With greater than expected international new builds and acquisitions that continue to garner higher growth and riskadjusted
returns than in US, we believe it is clear that non-US business will continue to become increasingly important for the company and that willing sellers remain in the market. Therefore, we expect continued strong growth from both in and out of the US.
Investment highlights
 Solid Q4/12 report, conservative outlook – Adjusted for one-time items ($15mm cash taxes, $6mm new market start-up capex), every
reported metric was better than we had expected for Q4/12. We expect the strong momentum will continue throughout the year as leasing activity at all four major carriers remains at an all-time high and Clearwire becomes active again.
 Adjusting estimates slightly – Although we continue to believe the company’s guidance for 2013 is traditionally conservative, we are only slightly adjusting our 2013 and 2014 estimates at this time to account for the greater than expected new builds, higher start-up capex in international markets and one-time lighting upgrade in US that will likely generate attractive returns over time.
 Remains attractively priced – We continue to find the stock attractively priced for purchase at 17.3x and 15.2x 2014E AFFO and EBITDA, respectively. Our $88 price target assumes 20.0x and 17.3x 2014E AFFO and EBITDA, respectively.

Rosetta Resources The Eagle Is Landing

English: Outcrop of the Eagle Ford and Austin ...
English: Outcrop of the Eagle Ford and Austin Chalk Contact off Kiest Blvd 1/5 of a mile east of Patriot Pky in Dallas County. (Photo credit: Wikipedia)

ROSE : NASDAQ : US$47.38
Target: US$69.00


Investment thesis

We are lowering our target price $1 to $69 per share due to slightly lower near-term production. Rosetta plans to conduct a five- to six-rig
program in the Eagle Ford this year with two to three rigs in Gates Ranch and two to three rigs collectively in Karnes Trough, Central Dimmit and Briscoe Ranch. In ’13, Rosetta expects to drill 75-80 wells and complete 60-65 Eagle Ford wells.
Given this disposition of drilling activity, we believe liquids should constitute ~62.5% of production, which is in line with guidance, and oil should comprise ~44.5% of production on average this year. Assuming ~$670 million in ’13 capital spending, we anticipate Rosetta exits ‘13 in the upper half of company guidance (52-56 Mboepd).Rosetta’s a natural consolidator in the Eagle Ford with a capital structure that has significant debt capacity
Considering Rosetta’s exceptional execution in the Eagle Ford, the company should be a natural consolidator in the trend. Moreover, Rosetta’s net debt-to-EBITDA is less than ~1x versus the industry’s net debt-to-EBITDA financial leverage of ~2x. This implies the company has ~$500 million of incremental debt capacity even before accounting for the debt capacity of an acquired asset.
Even assuming recent extremely weak NGL prices, equity downside limited In January, the NGL complex retreated to ~34% of NYMEX oil, which is
the lowest relative valuation evidenced thus far in this cycle. We believe long-term NGLs should comprise ~38% of Rosetta’s production
(currently ~34% of production). Assuming the NGL complex remained at this recent exceedingly weak level, the downside to our target price is

New Zealand Energy – Misses Targets

NZ Red Admiral Butterfly in Wellington, New Ze...
NZ Red Admiral Butterfly in Wellington, New Zealand Māori: Kahukura (Photo credit: Wikipedia)

New Zealand was the greatest AMP miss in 2012 . Here is the latest chapter  of that mistake:

New Zealand Energy

NZ : TSX-V : $0.39

, Net Change: -0.25, % Change: -39.06%, Volume: 2,213,150
Financing Uncertainty.

New Zealand Energy tumbled after announcing it does not expect to achieve its 3,000 boe/d target by
the end of Q1/13.

Given its current production rate of 335 bbls/d and limited funds, the company has decided not to pursue higher-risk, higher-reward opportunities, opting instead to focus on its pending Origin asset blocks. While the Origin assets have numerous uphole completion opportunities, which will cost significantly less than regular exploration locations, Canaccord Oil & Gas Analyst Christopher Brown has concerns surrounding the company’s ability to fund the Origin acquisition, which is now projected to close in Q2/13.

The company’s working capital position, including a $5 million deposit relating to the transaction, is currently only $16.8 million. The Origin transaction will cost an additional $37 million and the company has stated it will seek alternatives for financing in 2013. On its pending Origin (TAWN) assets, the company has six wells it can move onto in Q2/Q3 which have recompletion opportunities in the upper sections of the wells. Brown estimates that recompletions would cost roughly $500,000-600,000/well, for a total capital cost of $3.0-3.6 million. Brown notes these
recompletions could potentially impact production immediately as there is infrastructure in place.

Next catalysts: i) Arakamu – NZ perforated and flow tested two zones in the Arakamu-1A well in the Moki formation, but was unable to demonstrate
recoverable hydrocarbons and has suspended the well, and ii) Wairere – NZ has cased the Wairere-1A well and will complete the well once completion activities are finished at the Arakamu-2 well.

Cooper Tire & Rubber – Wall Street : Where The Rubber Hits The Road

Cooper Tire & Rubber Company
Cooper Tire & Rubber Company (Photo credit: Wikipedia)



Cooper Tire & Rubber’s fourth-quarter earnings fell 65% as the year-earlier period had a large taxbenefit, masking revenue growth and sharply higher margins as the company benefited from declining raw materials costs.

The company reported a profit of $73 million, or $1.15 a share, down from $209 million, or $3.33 a share, a year earlier while revenue increased 2.3% to $1.06 billion. Analysts had projected earnings of $0.85 on revenue of $1.03 billion.

Sales in the  company’s North American segment, which provides the majority of revenue, grew 5.2% thanks to improved volume and higher prices. “A strong fourth quarter capped off a great year,” said Chief Executive Officer Roy Armes. “Due in large part to successful product launches and demand for our products, the company has increased unit volumes and outpaced the industry in our key markets for the full year.”

However, the company views 2013 with cautious optimism amid continued uncertainty about the economy. Cooper expects that raw material costs in the current quarter will be about the same as during the fourth quarter, which represented a 2% decrease from the third quarter. However, over the longer term raw material prices are expected to generally trend higher.

Canfor Pulp – Rebound ?

Canfor (Photo credit: Wikipedia)


TSX : $10.36
Licence to print paper.

Along with  the recent re-instatement of the company’s dividend, Canfor Pulp appears poised for a rebound in 2013. Recently, the company finished a $250-million capex program aimed at upgrading the company’s mills, with the company now poised reap the benefits.

While pulp trends are still soft, CFX’s capex spend and exposure to a weakening Canadian dollar should support the shares. January 2013 pulp stats revealed an NBSK operating rate of 85% (down from 88% last month) and inventories of 31 days (seasonally adjusted) up from 29 days in December-2012.

A Bay Street analyst commented that weak buying from China and a pushback from a recent price increase as the reasons for the weaker stats.
Despite that it is expected that depleted on-ground inventories in China should force them to re-enter the market as buyers. The analyst also noted that aside from leverage to higher commodity pricing it should be noted CFX’s high sensitivity to the bilateral FX rate (with each US$0.01 fall in the Canadian dollar as increasing EPS by US$0.08).

Given current energy and metal commodity price trends the analyst sees potential for a “one way” currency trade with any further Canadian dollar depreciation accretive to CFX’s earnings. There also appears to be room to increase the company’s dividend from the current $0.05 per
quarter (~18% payout ratio) as the full benefit of the recent ~$250 million in capital upgrades is reflected in conversion costs as mills run at full capacity.

Agrium Q4 Report

Potash mining for fertilizer
Potash mining for fertilizer (Photo credit: Wikipedia)

AGU : TSX : $103.24
AGU : NYSE : US$101.10

Agrium traded lower after reporting relatively in-line Q4/12 results, EPS of US$2.16 versusprevious guidance of “slightly above US$2.00”.
The company did not offer Q1 or full-year guidance (historically, AGU only provides Q2 and Q4 guidance at the end of Q1 and
Q3 earnings, respectively).

Retail gross profit of US$509 million was lower than US$524-million estimate. Crop protection was better than expected at US$203 million (versus our US$168 million) due to better volumes and pricing as well as supplier rebate programs. Seed, merchandise  services and other was US$151 million versus Carpenter’s US$186 million due primarily to the pricing pressure associated with the livestock and wool segments within the Australian retail division.

Overall, the realized retail gross margin was 25.8%, in line with estimates. AGU’s nitrogen segment performed better than expected with a reported gross margin of US$326 million versus Carpenter’s estimated US$293 million. Volumes sold were in line with  estimates at 1.1mt but the average margin per tonne of US$290  In potash, gross margin of US$79 million was in line with US$78-million estimates as realized sales volumes of 341kt were in line with  estimates of 334kt and the average margin per tonne was in line at US$233 versus our US$235/t.

In phosphate, gross profit of US$47 million was lower than US$57 million estimates as a result of a lower margin per tonne (US$166 versus  estimates of US$199) resulting from higher operating costs.

We prefer the non-potash equities over the potash equities given expectation of a supportive agriculture macro environment and an expected near record U.S. planting this spring.