Small-Cap Growth Portfolio Changes - Aug 28

[dan_s]

On Sunday afternoon (8/28) I updated all 10 of the Small-Cap Growth Portfolio forecast/valuation models, primary to adjust them to agree with my new oil & gas price deck. You can now find all 10 of the updated forecast models on the EPG website under the Small-Cap tab.

Since Hemisphere Energy is close to a pure play on heavy oil, lower oil prices used in the models impacted it the most. My current valuation of HMENF declines by $0.60US to $3.25US, which compares to the 8/26 closing price of $1.29US. So, it is still a STRONG BUY, trading at a 152% discount to my current valuation. Obviously, if oil prices do go back over $100/bbl, my valuation will also increase. Hemisphere's polymer flood at Atlee Buffalo is working as expected and they should be reporting quarter-after-quarter of steady production growth while they generate a lot of free cash flow. Hemisphere is now virtually debt free.

IPOOF seems to have the most upside today, with a current valuation of $7.65US it is trading at a 171% discount to my valuation.

All ten companies closed on August 26 at deep discounts to my current valuations. They are all FCF positive.

CPG, HMENF, PHX, REPX and SOI all pay dividends.

[dan_s]

On August 10th, Michael Scialla from Stifel Nicolaus maintained a Buy rating on Talos Energy (TALO), with a price target of $38.00. The company’s shares closed August 26th at $21.20. The word on The Street in general, suggests a Moderate Buy with analyst consensus rating for Talos Energy with a $30.00 average price target.

My valuation model for TALO assumes that they will have reduced production in late Q3 and early Q4 for hurricane related shut-ins. My current valuation is $35.00 per share. My valuation has zero in it for their carbon capture & sequestration (CCS) business, which could end up being a significant revenue generator.

Keep an eye on the weather forecast, but TALO has a lot of upside for us.

[grimaldi]

Wish I could feel positive about Talos, it's bias I know, I have grown to distrust foreign countries,
and I'm a New Yorker and we should be inclusive. I do have green positions in IPOOF. (very) green in HMENF.
Maybe I'll feel more liberal after touring Greece and Turkey this fall.

[dan_s]

Talos is a U.S. based company and my valuation includes zero for the projects in Mexican waters. The management team is rock-solid.