Sweet 16 Update - August 25

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

Sweet 16 Update - August 25

Post by dan_s »

Susan and I are driving up to Dallas on Friday, August 26 for our oldest son's 41st birthday. He was born in Wichita Falls, Texas in 1981 where we spent a year. After leaving public accounting, I took a job with a tiny private upstream company helping them set up their accounting system. I worked long hours and Susan hated the town, so we moved back to Tulsa a few months after Clark was born. I took a job as CFO for Oklahoma Petroleum Management, which was a wild 2 year "gig" before Hess Corp. hired me in November 1983.

I sent an updated Sweet 16 summary spreadsheet to Sabrina that will be posted to the EPG website Friday morning. All of the current valuations are updated. As I posted earlier, there were no significant valuation changes since the decline in the oil price was offset by higher natural gas prices. Comstock Resources (CRK) got a nice valuation gain (to $40/share) since it is almost a pure "gasser".

For the four trading days that ended August 25, the Sweet 16 gained 8.14% and the portfolio is now up 68.74% YTD. During the same time, the S&P 500 Index lost 0.66% and is now down 11.94%. FEAR of the Fed's next move is keeping most stocks trapped in a Bear Market, while the Energy Sector continues to be the only place generating significant gains.

Comstock Resource (CRK) now leads the Sweet 16, up 148.08% YTD. Followed by:
Antero Resources (AR) up 142.34%
EQT Corp. (EQT) up 126.87%
SilverBow Resources (SBOW) up 109.13%
Range Resource (RRC) up 93.21%

Callon Petroleum (CPE) gained $3.37 to $44.42, but it is still down 5.99% YTD. It is the only Sweet 16 stock down YTD.
My adjusted valuation is $100.00 per share and First Call's price target is $70.55.
Callon's guidance is that they will ramp up production during 2H 2022 and their PV10 Net Asset Value on 12-31-2022 should come close to my current valuation.

SilverBow (SBOW) has the most upside to my valuation of $105.00 per share.

Ovintiv Inc. (OVV) is almost a "gasser". It's Q2 production was 500,192 Boepd (65% natural gas and NGLs). The Company's production should ramp up to 520,000 Boepd by year-end and they have a lot of high-quality running room. The Company's balance sheet is now in good shape and they pay a nice dividend.

SBOW and Earthstone Energy (ESTE) are my Top Picks. These small-caps will be closing very accretive acquisitions in a few months that should draw a lot more "love" from the Wall Street Gang in Q4.

When I get back from Dallas on Sunday, I will start working on the newsletter after I get all of the Small-Cap Growth and High Yield Income portfolio stock valuations updated.

There is still a lot of upside for the Sweet 16. Based on my 2023 conservative forecasts, the Sweet 16 is trading a combined PE ratio of 4.2, which is insane for a group of companies that are all free cash flow positive with lots of running room.
Dan Steffens
Energy Prospectus Group
SergioSays
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Joined: Mon Jul 12, 2021 8:59 am

Re: Sweet 16 Update - August 25

Post by SergioSays »

Drive safely and enjoy your son’s birthday. Carpe Diem!
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: Sweet 16 Update - August 25

Post by dan_s »

Got to Dallas safely. Now hanging out with Drake (5) and Wilson (1.5).
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: Sweet 16 Update - August 25

Post by dan_s »

August 27
Despite a little pullback on Friday, thanks to the overall market meltdown in a reaction to the Fed, the Sweet 16 had a good week; up over 7%.

After Labor Day, I expect the Wall Street Gang to pay more attention to the very low inventories of space heating fuels. Several firms are now forecasting $120/bbl oil in Q4. The first real cold wave could sent ngas over $12 in the U.S.

Brent oil now at $101/bbl, an $8 premium to WTI. OPEC is out of spare capacity and likely to cut their official quotas when they meet in early Sept.

The energy crisis is much worse in Europe, natural gas price moved over $95/MMBtu and natural gas rationing has started in eastern Europe. Japan/Korea ngas now near $70.
Dan Steffens
Energy Prospectus Group
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