Monday, November 27, 2006

Calls of Note Part 6

-Citigroup notes Hess (NYSE:HES) remains their top pick of the US oil majors. Firm is raising their target price to $68 from $58, to reflect expectations of multiple expansion as management enters the execution phase of a turnaround strategy that matures over the next year.

2006 promises the 1st of a multi-year period of growth in oil & gas prod'n: key projects are running ahead of schedule; 2006 is also a stellar year for reserve replacement and the 4th year of consecutive reserve life growth but captures only a fraction of the resource secured by current management.

The value gap vs its peers is tangible, with HES the only major trading below SEC value. Exploration is an upside; but the shares already ignore a growing list of unbooked discoveries where value is verified by recent transactions.

Credibility is an old excuse for current misvaluation. Execution is the catalyst to force a rerating as the impact of a multi year t/around becomes tangible. If the market does not recognize
this, the firm believes someone else will. Reits Buy.

Notablecalls: The wording of the call is strong enough to give me goosebumps!

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