With Cimarex Energy, the key is project selectivity

Given oil's importance in a growing global economy, natural gas and oil companies are likely to continue to experience steady demand for their services/products, and a provider worth a review is Cimarex Energy.

Cimarex Energy (NYSE: XEC) is an independent oil and gas exploration and production company.

In general, analysts see 2-5% production growth in F2008, including impressive drilling activity in the Permian Basin, Mid-Continent Granite Wash, and Gulf Coast Yegua/Cook Mountain regions. The company has proved reserves of more than 1.4 trillion cubic feet of natural gas equivalent.

Meanwhile, given high service costs, XEC is expected to be more selective regarding projects, favoring those projects that meet reservoir size requirements and that do not exceed project cost limits. The Reuters F2008/F2009 EPS consensus estimates for XEC are $4.89/$4.71

The risks? A substantial, sustained decline in oil / natural gas prices would hurt XEC's results. Production underperformance or severe weather also would hurt the company's results.

The First Call mean rating for XEC is: Hold. [6 firms.] Mean 2008 target: $58. [high: $68, low: $50.]

Stock Analysis: Cimarex Energy is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from XEC's shares. Note: More-cautious investors may consider waiting until XEC pulls-back to $51, but keep in mind that XEC may not retreat to that level. Sell / Stop Loss if you were to purchase shares in this company: $36.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.