Sweet 16 Update - August 3

[dan_s]

The main Sweet 16 spreadsheet has been updated on the EPG website. It shows my valuation and First Call's price target for each company. Just note that only seven companies (AR, CXO, ECA, EOG, GPOR, MTDR, RRC) have released Q2 results. My valuations will likely be changed a bit when they release Q2 results next week. First Call's price targets do include some old analysts' estimates.

The individual forecast/valuation models for the seven companies listed above have been updated and you can download them from the EPG website. Just log on, click on the Sweet 16 tab and then click on the company name.

So far, all of the companies have met or exceeded my production forecasts.

NGL prices are coming in lower than my forecasts for all of the companies and Permian Basin natural gas prices have also been lower. Additional pipelines will be coming online in West Texas within a few months that should help resolve the very large differentials out there. Crude oil prices in West Texas have not been impacted as much as the gas and NGL prices. South Texas (Eagle Ford) oil prices have been higher than WTI all year, which helped EOG and MTDR.

Antero Resources (AR) is a unique situation since they elected to "de-consolidate" from Antero Midstream (AM). "Reported Net Income" in the first quarter included a big non-cash gain on the transactions, so their reported EPS of $3.17 is misleading. My forecast is that AR have "Adjusted Net Income" of a small loss in Q3 and a small income in Q4. Most important is that they should generate enough cash flow from operations in 2H 2019 and in 2020 to fund their capital expenditures and continue growing production at ~10% per year.

IMO Gulfport (GPOR) had a good Q2, continuing to pay down debt and fund a stock repurchase program. Gulfport should be profitable in 2H 2019 even with the low gas prices.

None of our "gassers" have any exposure to the big gas price differentials in West Texas.

Concho Resources (CXO) got hammered on Tuesday because (a) they announced a big slow down in their drilling program and (b) timing of the release on a day when oil prices dropped 7%. Their decision to slow down well completions until more pipeline takeaway capacity is online seems like a wise move to me.

ECA, EOG and MTDR all reported strong Q2 results.

The other nine companies will all report Q2 results early next week and I will update their forecast models as quickly as I can.