Sweet 16 Update - June 8

[dan_s]

Thank to the good news from Continental Resources (CLR), the Sweet 16 was able to move up 0.43%. However, the Sweet 16 is still down 4.70% YTD. This is hard to explain since oil prices are about $10/bbl higher today than where they were on January 1st.

If I take out the four "gassers" (AR, GPOR, RRC and SWN) the other twelve are flat on the year. Natural gas storage is still way below the 5-year average, but mild weather forecast for June is not supportive of gas prices. All four of the gassers have most of their gas hedged, so this year's gas prices don't have much of an impact on my cash flow from operations forecast.

Nine of the Sweet 16 are now trading below book value. Since GAAP accounting rules for upstream companies require oil and gas assets to be written down to fair value, this should not happen.

Companies that recorded large mark-to-market writedowns on their oil hedges in Q1 will reverse them in Q2 causing a big flip to "Reported Earnings".

It appears that Team Trump got a deal done with Mexico late on Friday. That should give the overall market a boost on Monday, unless it was already baked in.

EnCana (ECA) is the newest member of the Sweet 16. Q2 will be the first full quarter of combined results with Newfield Exploration. Keith Kohl put out a flash alert on ECA last week rating it a Strong Buy with a $12 price target. ECA closed at $5.04 on Friday. FANG, MTDR and PAA are in Keith's Top Ten List for June.

My focus the last two weeks has been on the Small-Cap Growth Portfolio. All of the profiles and forecast models are now up-to-date.

This coming week, I hope to finish updating all of the High Yield Income Portfolio companies. Take a hard look at the OMP profile that will be in your email on Monday morning. It has strong distribution growth locked in.