"We are initiating coverage of Triton Energy with a Strong Buy rating and a 12-month stock price target of $60 per share," says John J. Gerdes, Houston-based vice president and E&P analyst for Raymond James & Associates Inc. Based in Dallas, Triton Energy is an international E&P company with exploration and development operations in Africa, Asia, Europe, Latin America and the Middle East. Its principal activities are in Colombia, the Malaysia-Thailand Joint Development Area and Equatorial Guinea. At year-end 1999, proven reserves totaled 1,590 billion cu. ft. of gas equivalent. Daily production last year averaged 256.5 million cu. ft. equivalent. "Triton's reserve base is approximately 64% oil, making it a compelling oil play," says Gerdes. "Accordingly, we expect Triton to enjoy the benefit of strong oil fundamentals. We are modeling West Texas Intermediate crude prices of $27.90 per barrel for 2000 and $30 per barrel for 2001." The company has a demonstrated history of production and reserve growth through exploration. "From 1995 to 1999, OIL's average annual reserve replacement, excluding acquisitions and divestitures, was 678%." Triton also has achieved excellent historical finding and development (F&D) costs and capital efficiency, he says. "Its 1997-99 F&D costs were 48 cents per thousand cu. ft. of gas equivalent compared with a peer-group median of 90 cents per Mcfe. Meanwhile, its current capital efficiency (EBITDA per equivalent unit of production divided by F&D costs) of 483% is significantly above a peer-group median of 203%." Zeroing in on Triton's future growth prospects, Gerdes says Equatorial Guinea offers tremendous multiyear exploration potential. "The extremely prospective geologic environment and the applicability of 3-D seismic offshore Equatorial Guinea-where the company has a 1.3-million-gross-acre concession in the Rio Muni Basin-make it reasonably probable that Triton will discover a number of Ceiba-type [offshore Africa] fields during the next several years." In October 1999, the company drilled a major oil discovery in the Ceiba Field offshore Equatorial Guinea. Current estimated gross proven reserves associated with Phase 1 development of the field are 75- to 100 million barrels; full-field development reserve potential could be 300- to 400 million barrels. The Ceiba Field is in the middle of a world-class hydrocarbon fairway. "The Gabon/Angola Salt Basin to the south and the Niger Delta to the north have an estimated 20-plus billion and 50-plus billion barrels of recoverable oil reserves, respectively." Says Gerdes, "Triton has ample financial capacity to execute its business plan, with nearly $241 million of capital availability." The company's 2000 capital spending program emphasizes exploration and development in Equatorial Guinea; the balance of its exploration activity this year will occur in Oman, Italy, Madagascar and Greece. Overall, annual production is expected to climb from 76.1 billion cu. ft. of gas equivalent in 2000 to 153.6 Bcfe in 2001. The company's sharp increases in estimated 2001 cash flow per share and earnings per share are due to a projected 8% increase in oil prices and a 102% increase in production as Block G in Equatorial Guinea comes on line. "Triton's capital structure is less financially leveraged than that of other producers. Its net debt-to-total-capitalization is 11% versus 22% for its peers." Note: Analysis took place 7-5-00 when OIL closed at $36.31 per share and was reaffirmed on 8-14 when $45.50. Currently, some 59.6 million shares are outstanding. The recent 52-week price range was $48.38-$10.75.