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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: tom pope who wrote (79107)	1/30/2007 1:15:28 PM
From: Carpe per Diem	Read Replies (2) \| Respond to of 206089

NXY downgrade writeup... Nexen Inc. (NXY-T , NXY-N) C$73.74 Decreasing Recommendation to HOLD on Valuation Event: We are decreasing our Recommendation on NXY to a HOLD, largely based on valuation on future growth prospects. Impact: Negative Details: Despite NXY being a well-run company, due to valuation levels we are decreasing our Recommendation to HOLD from a BUY. With much slower growth prospects in the future, we do not see as much upside as we do in other stocks at this time. Valuation: NXY is now trading at a risked P/NAV ($45 price deck) of 125% vs. an average P/NAV of 117% for its peer group. Based on our $60 price deck, NXY trades at 104% of P/NAV versus its peers at 92%. On an 2007 EV/EBITDA basis, NXY currently trades at 5.8x (versus the peer group at 5.5x). Justification of Target Price: Our $73.00 target price was derived by calculating the midpoint of our base NAV (using the TD price deck) and current case NAV (calculated using US$60 WTI) and then adding our forecasted 2006 and 2007 NAV growth rate. Recommendation: HOLD Prior: BUY Risk: HIGH 12-Month Target Price: C$73.00 Unchanged 12-Month Total Return: -0.7% Market Data (C$) Current Price $73.74 52-Wk Range $50.82-$75.20 Mkt Cap (f.d.)($mm) $20,359.6 Dividend per Share $0.20 Dividend Yield 0.3% Avg. Daily Trading Vol. (3mths) 1,483,992 Financial Data (C$) Fiscal Y-E December 31 Shares O/S (f.d.)(mm) 276.1 Shares O/S (basic)(mm) 261.7 Float Shares (mm) -- Net Debt ($mm) $3,639.0 Net Debt/Tot Cap 26.0% Estimates (C$) Year 2005A 2006E 2007E 2008E EPS (f.d.) 4.16 4.20 4.68 6.93 CFPS (f.d.) 9.61 9.11 11.63 14.72 NAVPS (f.d.) 57.95 -- -- -- Oil (b/d) 197000 170000 214000 226000 G as (MMcf/d) 262 233 373 344 CFPS (f.d.) Quarterly Estimates (C$) Year 2005A 2006E 2007E 2008E Q1 -- 2.39 -- -- Q2 -- 2.78 -- -- Q3 -- 2.26 -- -- Q 4 -- 1.68 -- -- Valuations Year 2005A 2006E 2007E 2008E P/E (f.d.) 17.7x 17.6x 15.8x 10.6x P/CFPS (f.d.) 7.7x 8.1x 6.3x 5.0x P /NAV 125.0% -- -- -- All figures in C$, unless otherwise specified. Nick Rontogiannis Ryan Savage, (Associate) Action Notes January 30, 2007 Equity Research 13 of 21 Investment Conclusion: Slower growth prospects and current valuation levels have lead us to downgrade NXY to a HOLD from our former BUY recommendation. Despite being a well-run company, we believe investors have more upside in our other names. We are recommending a long position in TLM and OPC, against a position in NXY.