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QEP Resources, Inc.

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With a diversified asset base, exposure to emerging plays and increased focus on the quality acreage of the prolific Permian Basin, this mid-cap onshore-focused E&P offers a compelling value. Recently, the company gave investors another reason to cheer after it authorized a share buyback program worth $1.25 billion. However, with rig prices rising on the back of stronger demand and stiff competition putting upward pressure on service costs, the company's margins are set to suffer in the Permian Basin. Moreover, while QEP plans to sell all its non-Permian assets, we are concerned over its ability to execute the planned disposal amid other large tracts of properties on the block. All these factors account for our cautious stance.

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