Friday, September 24, 2010

Citigroup (NYSE:C) Initiates Coverage on Petrohawk Energy (NYSE:HK)

Citigroup (NYSE:C) started covering Petrohawk Energy (NYSE:HK), starting them off with a "Hold" rating.

Citigroup analyst Robert Morris said in a note to clients that the downward pressure on natural gas prices will continue, and until that changes, there won't be much happening to change the rating.

While Morris likes the move away from conventional natural gas sources in North America to shale projects, especially Eagle Ford and Haynesville, until the supply and demand scenario changes, gas prices will continue to be low in the midst of an abundant supply.

Consequently, Petrohawk has the right production pieces in place, but until the fundamentals for gas prices improve, conditions will stay the same no matter how much resources a company may have.

This is why many natural gas companies have added oil assets recently in order to offset their exposure to natural gas pricing.

It's hard to see anything that will change this for some time.

Petrohawk closed Thursday at $14.95, gaining $0.24, or 1.63 percent. Citigroup has a price target of $19 on them. Not bad in these types of circumstances.

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