Reuters: 6 Wall Street Analysts are included in the First Call consensus. All 6 analysts rate it a BUY. The most recent report is dated 11/20/2018 from B Riley FBR with a valuation of $10.25.
My forecast for 2018:
$176.4 million Revenues, net of cash settlements on hedges
$-0.20 Adjusted Earnings Per Share*
$2.91 Operating Cash Flow Per Share
First Call's forecast for 2019:
$242.0 million Revenues
$0.54 Adjusted Earning Per Share*
$4.73 Operating Cash Flow Per Share
*The primary difference between GAAP "Reported EPS" and "Adjusted EPS" are non-cash mark-to-market adjustments on hedges and non-cash impairment expense. Thanks to falling oil prices, Lonestar should post a large non-cash GAIN on their hedges in Q4. "Reported EPS" may be as high as $0.50/share for Q4. Operating Cash Flow per share is what we focus on. Operating CFPS should be about $0.90 in Q4 (compared to $1.04 in Q3). Since Lonestar has ~95% of their Q4 crude oil production hedged at $56.66/bbl, the recent dip in oil price has very little impact on my CFPS forecast.
One of our "gifted" MBAs has completed his work on the Lonestar profile and I am reviewing it now. We should send it out later today.
Lonestar Resources (LONE) Update - Nov 27
Lonestar Resources (LONE) Update - Nov 27
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lonestar Resources (LONE) Update - Nov 27
During 3Q18, Lonestar added an additional 1,000 Bo/d for 2019 and 1,000 Bo/d for 2020 at an average weighted price of $67.39/bbl and $63.61/bbl, respectively. Additionally, Lonestar executed LLS/WTI basis swaps which match the volumes of the Company's WTI swaps at an average weighted price of $5.05/bbl for 2019. By locking in these swaps, it should allow the Company to realize a premium to WTI after marketing, regardless of market conditions.
NONE of Lonestar's natural gas and NGL's are hedged (~40% of production on a BOE basis).
NONE of Lonestar's natural gas and NGL's are hedged (~40% of production on a BOE basis).
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lonestar Resources (LONE) Update - Nov 27
I can understand if your value of any given stock is within, say, 10% of consensus up or down, but how can your value be twice that of consensus on LONE? Makes no sense to me. It seems like a complete disconnect.
Re: Lonestar Resources (LONE) Update - Nov 27
I just posted the updated profile and forecast model for Lonestar to the EPG website.
Take a look at my forecast/valuation model and tell us what you think is wrong with it. Take a hard look at production growth and row 49. Note that my forecast is actually way below the current First Call forecast for operating cash flow per share.
My forecasts/valuation models are only as good as the accuracy of the assumptions in the future periods. If you don't agree with the production for commodity price assumptions, then you can change them in the models and the Excel spreadsheet, which is macro driven will automatically update. My opinion is that any small-cap with this much running room (at least 30% production growth locked in) AND the capital to execute its business plan should be worth AT LEAST 6X forward cash flow from operations.
Take a look at my forecast/valuation model and tell us what you think is wrong with it. Take a hard look at production growth and row 49. Note that my forecast is actually way below the current First Call forecast for operating cash flow per share.
My forecasts/valuation models are only as good as the accuracy of the assumptions in the future periods. If you don't agree with the production for commodity price assumptions, then you can change them in the models and the Excel spreadsheet, which is macro driven will automatically update. My opinion is that any small-cap with this much running room (at least 30% production growth locked in) AND the capital to execute its business plan should be worth AT LEAST 6X forward cash flow from operations.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Lonestar Resources (LONE) Update - Nov 27
I think you missed my point. I am not suggesting that your conclusions are incorrect . I am wondering how it could be so different than consensus. If all these analysts are "professionals," and are looking at the same facts as you, how can the conclusions be so different?
Re: Lonestar Resources (LONE) Update - Nov 27
Lonestar is a very small company with market-cap under $200 million. Companies this small have very limited analysts coverage. Even the large-caps have wide gaps between the lowest and highest valuation. For example:
> In the last 3 months, 15 ranked analysts set 12-month price targets for PXD. The average price target among the analysts is $236.08 with a range of $195 to $302.
> In the last 3 months, 12 ranked analysts set 12-month price targets for EOG. The average price target among the analysts is $134.92 with a range of $115 to $164
Keep in mind that EOG and PXD are companies with very consistent production that give extremely accurate guidance, in other words they are easy to model and forecast. Yet, over a dozen smart analysts still come up with very different valuations.
Lonestar has a very low share count, only 24.6 million shares outstanding. Therefore, a small change in my valuation assumptions makes a big difference in the share valuation.
My valuations are not really "price targets". They are what I think the company would sell for if it were put up for sale and there were several interested buyers bidding against each other. In other words, what it's "Fair Market Value" is. Since 2001 (when EPG was founded) there have been dozens of our Sweet 16 companies taken over. Most of them have sold for close to my valuations.
My advice to you is take 30 minutes to really understand the forecast models. Go down the Income Statement line-by-line and see how I come up with each revenue and expense line item. It is much easier than you think. Then look at the most important line item: Cash Flow From Operations. It is a macro-driven calculations, but basically I take Net Income and remove the non-cash items. The forecast models are a valuable tool, once you understand them.
> In the last 3 months, 15 ranked analysts set 12-month price targets for PXD. The average price target among the analysts is $236.08 with a range of $195 to $302.
> In the last 3 months, 12 ranked analysts set 12-month price targets for EOG. The average price target among the analysts is $134.92 with a range of $115 to $164
Keep in mind that EOG and PXD are companies with very consistent production that give extremely accurate guidance, in other words they are easy to model and forecast. Yet, over a dozen smart analysts still come up with very different valuations.
Lonestar has a very low share count, only 24.6 million shares outstanding. Therefore, a small change in my valuation assumptions makes a big difference in the share valuation.
My valuations are not really "price targets". They are what I think the company would sell for if it were put up for sale and there were several interested buyers bidding against each other. In other words, what it's "Fair Market Value" is. Since 2001 (when EPG was founded) there have been dozens of our Sweet 16 companies taken over. Most of them have sold for close to my valuations.
My advice to you is take 30 minutes to really understand the forecast models. Go down the Income Statement line-by-line and see how I come up with each revenue and expense line item. It is much easier than you think. Then look at the most important line item: Cash Flow From Operations. It is a macro-driven calculations, but basically I take Net Income and remove the non-cash items. The forecast models are a valuable tool, once you understand them.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group