APA Corp. a new Buy at Benchmark as Suriname assets near commerciality
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APA Corp. (NASDAQ:APA) +2.8% in Thursday's trading as Benchmark initiated coverage with a Buy recommendation and $46 price target, saying the stock has significant leverage to a recovery in global energy prices, while its assets in Suriname and contract to sell liquefied natural gas are differentiated.
APA's (APA) domestic assets are a source of free cash flow while the Suriname development nears a declaration of commerciality, Benchmark's Subash Chandra wrote.
The stock's below average EV/EBITDA multiple, currently burdened by domestic assets which are viewed as gassy and mature, should rise as Suriname is increasingly reflected in the stock price, Chandra said.
Diamondback Energy also is started at Buy with a $154 PT, citing the company's focused operations, improving well productivity and high free cash flow per flowing barrel.
Chandra noted Diamondback's (FANG) return of capital formula as among the most generous and flexible, weighed more toward share buybacks than variable dividends.
Permian Resources (PR) also merited a Buy rating at Benchmark, saying it is undervalued relative to the company's low-cost structure, Delaware concentration, disciplined strategy, FCF focus and enviable track record.
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