Sweet 16 Forecast Updates - June 26

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Sweet 16 Forecast Updates - June 26

Post by dan_s »

I have updated 12 of the individual Sweet 16 forecast/valuation models with more current oil, gas and NGL price assumptions for all future periods. You can view them on the EPG website and download them to Excel where you can change the commodity price assumptions at the bottom if you wish.

I will finish updating the final four today (CXO, PDCE, RRC and SWN).

On 6/24/19 Stifel sent out an update on the E&P companies that they cover. Their price target for Concho Resources (CXO) is $228/share. CXO is currently trading at $103/share.

If you'd like to see the new Stifel report, send me an email (dmsteffens@comcast.net). It shows their price targets and NAVs for most of the companies in the Sweet 16 and our Small-Cap Growth Portfolio.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Sweet 16 Forecast Updates - June 26

Post by dan_s »

I have reviewed the presentation that PDC Energy (PDCE) made at the June 19th JP Morgan Energy Conference and updated my forecast/valuation model.

In the last 3 months, 6 ranked analysts set 12-month price targets for PDCE that range from $53 to $68. The average price target among the six analysts is $57.80.
In the Stifel report mentioned above, they estimate PDC's NAV at $81/share. Stifel's official price target is $57/share.

As I post this, PDCE is trading at $35/share.

PDCE and SRCI (from our Small-Cap Growth Portfolio) get most of their production from the Colorado DJ Basin. IMO all of the Colorado based companies, even SM and XEC that have no production in Colorado, trade at much lower multiples of operating cash flow than their peers because of the "geopolitical risk" associated with Colorado. IMO the discounts are not justified.

My valuation of PDCE is $71/share today, but the company's fundamentals deserve a much higher price.
> If WTI averages $55/bbl in 2H2019 and 2020, all of PDE's future D&C spending will be covered by cash flow from operations AND generate ~20% YOY production growth.
> Midstream bottlenecks in the DJ Basin have depressed commodity prices in the region, primarily natural gas and NGL prices. The bottlenecks are already being resolved and should be completely resolved in 6-9 months.
> PDC's hedging program takes a lot of commody risk away and they should generate more than $1 Billion of cash flow from operations 2020 (compares to this year's $850 CapEx program).
> The BOD has approved a $200 million stock repurchase program that should reduce the common stock outstanding by more than 5%.
> PDC increase production by 26.2% in 2018 and they are on-track to increase production by more than 20% in 2019.
Dan Steffens
Energy Prospectus Group
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