Sweet 16 Forecast Updates for Q2 Results - Aug 2

[dan_s]

As each quarter's results come pouring in (like water from a fire hose), my top priority is updating all of the Sweet 16 portfolio companies' forecasts first. When I have time, I will update the Small-Cap forecasts next and then the High Yield companies.

So far, Q2 results have been very close to my forecasts. However, I am lowering the multiples of operating cash flow that I am using to value them simply because in this bear market for energy sector companies the valuations are so far out-of-whack with historical valuations.

The highest multiple that I will use for any company that is still outspending cash flow from operations is 5X CFPS. Obviously, a company growing production by 50% annually with a lot of running room s/b more valuable than a company with 10% production growth locked in.

I cannot remind you enough that "Reported Net Income" is a worthless number for any upstream company with lots of their production hedged. "Adjusted Net Income" is what should be compared to my forecasts and First Call's forecasts.

As forecast models are updated they are posted to the EPG website home page. You must log on to see them.