XTO Energy is well-positioned in the cleaner energy

Posted Apr 3rd 2008 4:50PM by Joseph Lazzaro
Filed under: Commodities, Oil, Stocks to Buy

In this investing environment, it's best to consider a defensive play or two, and while the oil/gas sector is not a defensive, strictly speaking, XTO Energy comes close to fitting the bill, and is worth an evaluation.

XTO Energy (NYSE: XTO) buys primarily demonstrated oil/gas properties -- areas where the commodities are 'known,' if you will - - then produces and markets natural gas, natural gas liquids, and crude oil, primarily.

XTO owns interests in more than 18,800 wells and operates gas gathering systems in Arkansas, Oklahoma, and Texas.

Analysts expect oil/gas production growth of 15%-20% in 2008. Analysts also really like XTO's 6.9 trillion cubic feet of proved natural gas reserves: look for natural gas to play a larger role in the United States' energy system, amid high oil prices and increasing environmental awareness. The Reuters FY 2008/FY 2009 EPS consensus estimates for XTO are $3.61 to $3.69.

The risks? A sustained U.S. economic downturn would affect natural gas demand and hurt XTO's results. Analysts are also keeping an eye on XTO's skilled labor costs.

The First Call mean rating for XTO is: Hold [28 firms]. Mean 2008 target: $68 [high: $78, low: $53].

Stock Analysis: XTO 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 XTO's shares. Sell/Stop Loss if you were to purchase shares in this company: $48.

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.

Tags: natural gas, oil, XTO, XTO Energy