Earthstone Energy (ESTE) Update - May 22

[dan_s]

I have posted an updated profile and an updated forecast/valuation model for Earthstone to the EPG website.

Earthstone is one of the companies in our Small-Cap Growth Portfolio. It has STRONG PRODUCTION GROWTH locked in.

IN MY OPINION, the real value of your EPG membership is the accurate forecast models that I produce which are updated WAY BEFORE Reuters/First Call numbers are updated. Having an accurate view of what these companies will be reporting next quarter and for the rest of the year SHOULD give you an edge on the Wall Street Gang.

This is especially valuable during the "Rebound Phase" of an oil price cycle.

As Susan likes to remind me on a regular basis, most of you don't have a Masters Degree in Accounting & decades of oil & gas financial experience. Therefore, the forecast models might look like a spreadsheet full of numbers, BUT I have made them as simple as I can.
1. Revenue - Expenses = Net Income.
2. Net Income +/- non-cash items = Cash Flow From Operations
3. Stock valuations are based on a reasonable multiple of cash flow from operations, which I highlight on each forecast model.

Investment Advisors always tell clients to do their "due diligence" before investing. The problem is that most individuals don't have a clue how to do "due diligence".
Reading our profiles and taking some time to understand our forecast/valuation models is a good place to start.

Remember, the forecast models are "macro driven". You can change the assumptions at the bottom of each forecast and the spreadsheet will automatically update. Try it. See what $100/bbl oil does for Earthstone's stock valuation.

[mkarpoff]

I agree with your contentions, but I have always wondered... Why do you assess the price target predicated on what you believe to be a company's buy-out price (or similar) when all of the other analysts predicate their price expectations differently? Wouldn't it be more of an apples to apples dynamic if you did the same?

[dan_s]

My valuations are what I think the stock is worth today. Most analysts do the same thing, they just call it a "price target".

My work should just be one of many things that you look at. All I can tell you is that when oil prices are moving this fast, most of the reports submitted to First Call are way behind the curve. This is especially true for the small-caps.

Still lots of FEAR in the market. Look what a slight decline in oil price did today. Oil is at a 3.5 year high and most of the upstream company stock prices are just barely up YTD.