“Is it over?” asks Michael Bodino, lead analyst at Coker & Palmer Investment Securities. No, he says. “As typical with any major sector rotation, the baby appears to be thrown out with the bathwater.” Oil prices are falling and, while Bodino is comfortable through 2008, “the economic unknowns regarding 2009 are quite disconcerting. Still there are many attractive E&P investments, he adds. He is raising his gas-price forecast for 2008 to $10.41 and for 2009, to $9.32. His oil-price forecast for 2008, $116.70; 2009, $109.65. “We have maintained long-term oil and gas prices at $80 per barrel and $8 per Mcf to reflect where we think energy equities should be valued relative to the forward strip and acquisition-market valuations. We think energy equities are currently reflecting just north of $7 long-term natural gas prices.” He likes CNX Gas, Ultra Petroleum, Southwestern Energy, ATP Oil & Gas and Parallel Petroleum. He has moved Foothills Resources from “accumulate” to “not rated until additional information is available providing better financial visibility.” “While we are in the midst of what we believe to be a seasonal pullback, we think this is a good time for investment into many of the companies in our coverage list. Companies with the best risk/reward and catalyst visibility for second-half 2008 include Bill Barrett Corp., Energy XXI, Delta Petroleum Corp., Harvest Natural Resources, Petrohawk Energy Corp., Plains Exploration & Production and Ultra Petroleum. “Looking forward, Carrizo Oil & Gas Inc., Quicksilver Resources Inc. and XTO Energy Inc. are also inexpensive equities and well positioned to generate leading cap-size growth rates into 2009 and beyond.” –Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch, OilandGasInvestor.com; ndarbonne@hartenergy.com
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