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Gold/Mining/Energy : Big Dog's Boom Boom Room
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From: Big Dog8/16/2011 8:55:00 AM
1 Recommendation   of 206181
 
Pritchard

RRC – Raising Price Target to $101 from $70 and Adding to Top Picks – The key take away from Enercom is that we believe RRC is significantly undervalued. We believe that the Upper Devonian in southwest PA is a potential game changer for RRC. The company has only drilled two wells to date so far. While still early, what is impressive is the following. First, the wells have a higher liquids content than the Marcellus because they are shallower; and second, the decline rates are holding in well compared to the Marcellus. The second Upper Devonian well is expected to have an EUR of 4.7 Bcfe. This is incredibly encouraging for so early on in the play. More than likely, we believe that results will only improve going forward. As a result, we are now allocating $21/share to the Upper Devonian in Southwest PA to our price target. This assumes that 25% of 550,000 acres is developed on 80 acre spacing over 36 years. A well is expected to have a gross EUR of 4.5 Bcfe (3.8 Bcfe net) and a cost of $4.1 million. In the first part of 2012, the company is expecting to drill a well in what it believes is the most liquids rich part of its acreage. Strong results could be a catalyst for the stock. We are also allocating now $10/share to the company's mid-continent assets. Previously, we were assigning no value. The majority of that increase ($6/share) is driven by the Mississippian where the company recently added 15,000 acres, bringing its total acreage position to 60,000 net acres.
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