Sweet 16 Update - July 23

[dan_s]

For the week ended July 22, the Sweet 16 declined 2.94% because of the dip in crude oil prices. YTD the Sweet 16 is up 29.79%, compared to the S&P 500 Index that is up 6.42% YTD.
> All 16 stocks declined
> All 16 saw First Call raise their price targets

Despite the obvious evidence that the global oil market is balanced today and that production continues to fall just as we enter the peak demand period of the year, speculators pushed oil prices lower. FEAR that European demand will weaken because of Brexit and the uptick in terrorist attacks is justified, but Europe is just a small part of global oil demand.

The outlook for natural gas and NGL prices has improved. This will be the topic of my weekly podcast, which should be up on the EPG website on Sunday.

I have increased my valuations for Antero Resources (AR) and Parsley Energy (PE). I also took a hard look at Diamondback Energy (FANG) and left my valuation at $99.00/share.

Range Resources (RRC) and Pioneer Natural Resources (PXD) will announce 2nd quarter results next week. These are both very important because RRC is the #1 natural gas company in the U.S. and PXD is one of the top companies in the Permian Basin.

A few things to note before Q2 results come pouring out:
> Impairment write downs should be over (thank God) because oil & gas prices have moved much higher than where they were in Q1.
> Mark-to-mark adjustment on hedges go in the opposite direction of commodity prices, so ignore the non-cash portion.
> Take note of each company's production mix. I now believe natural gas and NGL prices will be a lot higher by year-end.

STACK has become the #1 oil play in the U.S. Take the time to read carefully what CLR, DVN, NFX and XEC are saying about it. The Permian Basin is a close second. Of these four, I believe DVN has the most upside from here.

I will be updating all of the Sweet 16 forecast models as soon as I can after they release Q2 results.

PS: After our luncheon on July 26 (hosted by Lonestar Resources), Susan and I will be heading to Tulsa for her mother's memorial service. I will return on Saturday.