UPDATE 1-RESEARCH ALERT-KeyBanc raises Southwestern, XTO Energy

Jan 6 (Reuters) - KeyBanc Capital Markets upgraded Southwestern Energy Co (SWN.N) and XTO Energy Inc (XTO.N) to "buy" from "hold," saying the companies had exposure to shale plays with "strong drilling economics" and were also led by good management teams.

The brokerage, however, downgraded Newfield Exploration Co (NFX.N) to "hold" from "buy."

"While we believe there is value in this name, we would prefer to wait for a recovery in the group before we become more positive on lower economic types of plays," said KeyBanc, which also cut its price targets on nine exploration and production (E&P) companies.

But KeyBanc was positive about 2009 and said with natural gas prices well below the marginal cost of drilling, the gas market could be on its way to self-correction.

Crude oil pricing is tougher to call, but a global economic stabilization will benefit prices during the second half of the year if not sooner, it added.

The brokerage noted that the E&P stocks under its coverage have shed more than 70 percent of their value since their 52-week high in early July, compared with a 40.3 percent drop in the S&P 500 Index .SPX.

"We believe there are a lot of values for longer-term focused investors as U.S. and global recessionary headwinds begin to subside," the brokerage wrote in a note to clients.

Among KeyBanc's top picks were Approach Resources Inc (AREX.O), Comstock Resources Inc (CRK.N), Whiting Petroleum Corp (WLL.N), Southwestern Energy and XTO Energy.

"Our top picks include companies with strong balance sheets and hedge positions that have meaningful positions in plays with strong drilling economics, such as the Marcellus and Haynesville shale plays to name two," the brokerage said.

For the alerts on price target changes, please double click [ID:nWNAB7045] (Reporting by Arup Roychoudhury in Bangalore; Editing by Himani Sarkar) (arup.roychoudhury@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: arup.roychoudhury.reuters.com@reuters.net))