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Athlon Energy: A Strong Buy

Zacks Equity Research

On Jan 1, Zacks Investment Research upgraded Fort Worth, TX-based oil and liquids-rich natural gas explorer Athlon Energy Inc. (ATHL) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

We remain optimistic about the firm’s near-term prospects, supported by its high-quality Permian Basin holdings, impressive oil production growth and continued strong operating performance led by an efficient management team.

Detailed Analysis

Athlon Energy, which went public in Aug last year, is an independent exploration and production company engaged in the acquisition, finding, and development of unconventional onshore oil and gas properties. The company’s operations are concentrated primarily in the Permian Basin in West Texas.

With holdings of around 100,000 net acres in the eastern portion of the Permian Basin and approximately 30 years of vertical drilling inventory, Athlon Energy’s asset portfolio is primed for high production growth and peer-leading returns.   

Another positive in the Athlon Energy story is its progress towards cost reduction. In particular, the company has been able to cut down on lease operating expenses significantly – to $7.19 per barrel of oil equivalent in the third quarter of 2013, from $10.21 a year ago. Finally, Athlon Energy maintains a stable balance sheet that will continue to provide the flexibility to fund its capital program and pursue bolt-on acquisitions.   

Based on the success of the company’s large reserve potential, long resource life and low-risk assets in a prolific basin, analysts are predicting strong earnings growth for Athlon Energy in 2014. This year’s Zacks Consensus Estimate of $1.24 represents earnings per share growth of an impressive 39% over 2013.

Other Stocks to Consider

Some other stocks worth considering in the domestic upstream sector include Harvest Natural Resources Inc. (HNR), Bonanza Creek Energy Inc. (BCEI) and Midstates Petroleum Co. Inc. (MPO). While Harvest holds a Zacks Rank #1 (Strong Buy), Bonanza Creek and Midstates Petroleum both carry a Zacks Rank #2 (Buy).

Read the Full Research Report on BCEI
Read the Full Research Report on HNR
Read the Full Research Report on MPO
Read the Full Research Report on ATHL

Zacks Investment Research