Tudor, Pickering, Holt & Co. Securities Inc. analyst Dan Pickering and team says they believe that five companies will help grow production in the southwestern section of the Appalachian Basin. He says most of the attention now is on Pennsylvania, because that is where the land rush is ongoing. 

They have picked Range Resources Inc., Fort Worth (NYSE: RRC), Equitable Resources Inc., Pittsburgh (NYSE: EQT), Exco Resources Inc., Dallas (NYSE: XCO), Atlas Energy Resources LLC, Moon Township, Pa., (NYSE: ATN) and Chesapeake Energy Corp., Oklahoma City (NYSE: CHK).

“We believe these companies can meaningfully grow Appalachia-production and reserves in the next one to three years,” Pickering says.  “We expect a higher rig count and a higher percentage of horizontal drilling in the core. Water sourcing and disposal should be easier in the Ohio River Basin—the Monongahela and Allegheny Rivers combine to source the Ohio River.”

He is increasing his target price per share for Range Resources by $5 to $87 and by $6 to $47 for Exco Resources. The target price for Chesapeake Energy remains at $101, he says.

In the noncore development in the central-northeast section of Appalachia, Pickering sees these companies coming on strong: Rexx Energy Corp., State College, Pa. (Nasdaq: REXX), Southwestern Energy Co., Houston (NYSE: SWN), Ultra Petroleum Corp., Houston (NYSE: UPL), Carrizo Oil & Gas Inc., Houston (Nasdaq: CRZO) and Chesapeake.

“It’s going to take longer for these companies,” Pickering says. “Instead of one to three years, think three to six years to meaningfully grow production and reserves. Rigs will be drilling more vertical wells initially to test and hold acreage, but move toward horizontal drilling quickly as acreage is appraised and held by production.” 

--JAS