Earthstone Energy (ESTE) Update - June 21

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Earthstone Energy (ESTE) Update - June 21

Post by dan_s »

ESTE closed at $16.74 on June 17, which compares to my current valuation of $38.00.

THE WOODLANDS, Texas, June 21, 2022 /PRNewswire/ -- Earthstone Energy, Inc. (NYSE: ESTE) ("Earthstone") today announced that President and CEO, Robert J. Anderson, will participate in a fireside chat with Jeff Robertson of Water Tower Research at 2:00 p.m. Eastern Time on Wednesday, June 22, 2022.

Robert will give an update of Earthstone's operations, integration efforts on its newly acquired assets and discuss the Company's overall corporate strategy going forward.

Investors who are interested in listening may register through Water Tower Research using the following link: https://globalmeet.webcasts.com/starthe ... 287f94afd7

About Earthstone Energy, Inc.

Earthstone Energy, Inc. is a growth-oriented, independent energy company engaged in acquisitions and the development and operation of oil and natural gas properties. Its primary assets are located in the Permian Basin of west Texas and New Mexico. Earthstone is listed on the New York Stock Exchange under the symbol "ESTE." For more information, visit Earthstone's website at www.earthstoneenergy.com.

Contacts

Scott Thelander
Vice President of Finance
281-298-4246 / scott@earthstoneenergy.com
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Earthstone Energy (ESTE) Update - June 21

Post by dan_s »

You should all listen to the webcast today at 1pm CT. If it confirms my forecast model assumptions, ESTE is a "Screaming Buy" at today's share price.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Earthstone Energy (ESTE) Update - June 21

Post by dan_s »

After watching today's "Fireside Chat" with Robert Anderson, I did not hear anything to reduces my valuation of $38.00/share. I now expect their Q2 results to beat my forecast.
> Production is ontrack to be 80,000 Boepd or more in Q4. Four rig drilling program should take the exit rate to 82,000 Boepd.
> I am only assuming an increase to 84,000 Boepd in 2023, which now looks conservative since they are running four operated rigs.
> Earthstone's revenues are heavily weighted to liquids, so the recent pullback in natural gas prices has very little impact on my valuation. If I assume HH gas averages $6/MMBtu for 2H 2022 and $5/MMBtu in 2023 it only lowers my current valuation by $1.50 to $36.50/share.
> The BigHorn Acquisition that closed April 14, 2022 adds a lot of Proved Reserves and most of it is PDP, so Earthstone's YE 2022 reserve report should show a PV10 Net Asset Value over $30 per share just for Proved Reserves (P1).
> Earthstone added lots of people with BigHorn Acquisition, which can be good or bad. Robert Anderson sounded very please with the quality of the staff they inherited and I'm sure the BigHorn people or happy to be working for an Aggressive Growth company.
> I expect Earthstone to be back in the acquisitions market by Q4. They are generating lots of FCF (~$500 million this year) and they have a strong balance sheet. Leverage should be less than 1.0 X EBITDA at year-end, which is VERY GOOD for a company growing this fast.
> There is a chance that Earthstone starts paying dividends in 2023, but management is more focused on growth, so I would not count on dividends coming soon. Their strategy is growth thru targeted acquisitions, so balance sheet strength and liquidity are important.

TipRank's price target is $21.67, there has not been an updated analyst's report submitted to TipRanks since 5/12/2022 when RBC's price target was $20/share. On 4/12/2022 Neal Dingmann at Truist Financial (a very good energy sector analyst) raised his price target to $30/share. On April 12th WTI was $95 and HH gas was $6.85, but I'm sure that Neal's valuation was based on lower commodity prices.

Looking at Next Year: Using realized commodity prices in 2023 of $80 for crude oil, $4.50 for natural gas and $40 for NGLs, Earthstone should generate $1.046 billion of operating cash flow with at least half of that being FCF from operations. 6X operating cash flow s/b a reasonable valuation, which would be $45/share based on my model.

At the time of this post ESTE was trading at $14.88.

My current valuation stays at $38.00.
Dan Steffens
Energy Prospectus Group
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