Earthstone Energy (ESTE) Update - Oct 15

[dan_s]

ESTE: Earnings Preview from John at Roth Capital

We have employed a blended valuation of a 70% weighting of ESTE’s PV10% NAV per share and a 30% weighting of ESTE’s Leverage-Production Adjusted Multiple NAV per share which resulted in a blended NAV of $11.34 which we adjusted lower to $11.25 which is our price target.

We have updated our 3Q 2019 estimates using actual 3Q 2019 oil and gas prices and minor adjustments to our estimates for ESTE’s 3Q 2019 production. Our 3Q 2019 production estimates have been adjusted from 10,208 BOE per day (65% oil, 19% NGL, 16% natural gas) to 10,357 BOE per day (60% oil, 18% NGL, 22% natural gas).

Our 4Q 2019 estimates followed suit from 13,271 BOE per day (65% oil, 19% NGL, 16% natural gas) to 13,269 BOE per day (68% oil, 15% NGL, and 17% natural gas). The changes to the oil/NGL/natural gas split are based on ESTE’s commentary on the 2Q 2019 earning conference call.

Our 3Q 2019 estimates move slightly lower from EPS/EBITDA $0.14/$24.2 million to $0.12/$22.5 million. The lower estimates are due to ESTE's hedge book which has hedge prices significantly higher than our estimated oil and gas prices for 3Q 2019. Actual 3Q oil and gas prices were higher than our estimates so hedging revenues were lower.

ESTE is guiding to a 2019 production exit rate in a range of 14,000 BOE per day to 15,000 BOE per day with a midpoint of 14,500 BOE per day. Using the midpoint this is an eye-catching 9% increase over our 4Q 2019 estimate of 13,269 BOE per day

[dan_s]

Earthstone is hosting our next Houston luncheon on November 13.