In a research report sent to investors today, Canaccord Genuity analyst Stephen Berman maintained a Buy rating on Sanchez Energy (NYSE:SN), but reduced his price target to $20 (from $24), following yesterday’s news that the company has reduced its 2015 capex budget to $600M-$650M from $850M-$900M. It now plans to run 3 net rigs, down from 7 currently, and expects production to average 40-44 MBoe/d, down from 50 MBoe/d.
Berman noted, “With 224K net acres in the Eagle Ford (EF), SN is one of the most levered companies to the play relative to its size. We view recent capex cuts as prudent given the current commodity price environment and illustrative of the company’s operational flexibility as it focuses on its highest quality areas in the EF.”
The analyst added, “Our new $20 price target represents a 25% discount to a $26.65 NAV. Our prior $24 target reflected the same discount to a ~$32.50 NAV.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Stephen Berman has a total average return of -19.3% and a 30.6% success rate. Berman has a 35% average return when recommending SN, and is ranked #3410 out of 3451 analysts.