$130 oil price tolerance for the market/economy.

Post Reply
RTaber1
Posts: 75
Joined: Thu May 26, 2016 11:25 pm

$130 oil price tolerance for the market/economy.

Post by RTaber1 »

A JP Morgan analyst has opined that the stock market could handle $130 oil and 2.5% 10 year US treasury bond yields.
He even suggests $150 oil need be survivable in the short-term. Without wishing to seem guilible, which of your small
cap oil weighted stocks is most leveraged to the upside from here? Do you consider Ring Energy to be a break-out
oil stock once it's $56 hedges drop off?

Thank you.
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: $130 oil price tolerance for the market/economy.

Post by dan_s »

MGY has none of their oil hedged, but it already trades at a decent multiple.

Ero Copper (ERO) and Goodrich Petroleum (GDP), because it is almost a pure play on Haynesville gas doesn't have much exposure to oil. Solaris (SOI) is an oilfield services company that will indirectly benefit from high oil prices. SOI pays a nice dividend.

If oil stays over $80/bbl, HMENF and IPOOF should both triple.

Ring Energy (REI) is on pace to generate ~$0.80 operating cash flow per share in 2021. They will still have about 1/3rd of their 2022 oil hedged at $46.60/bbl, but if WTI averages $80/bbl they should generate over $1.60 operating CFPS next year. 5X CFPS is a reasonable 12-month target price. If WTI goes over $100/bbl it is a possible triple.

PVAC is now trading as Ranger OIl (ROCC) and I think it could be a six month double for us.
Dan Steffens
Energy Prospectus Group
Post Reply