Sweet 16 Update - July 12

[dan_s]

Bonanza Creek Energy, Inc. (BCEI) announced on July 8 the closing of its previously announced acquisition of assets in the Wattenberg Field that consist of approximately 86,000 gross (34,000 net) acres and net production of 700 Boe/d (85% oil). After normal and customary closing adjustments, the total consideration paid to the seller included $174.2 million in cash and 853,492 shares of Bonanza Creek common stock. The effective date for the acquisition was June 1, 2014.

Carrizo Oil & Gas (CRZO) seems to be getting a lot of hard looks from Wall Street heading into earning seasons. Several analysts have increased their EPS estimates lately. Last week I raised my valuation to $81.25/share.

Concho Resources (CXO) is my Top Pick in the Permian Basin. Here is what Zacks said this past week: “With holdings of around 605,000 net acres across the Permian Basin, 22,000 drilling locations and approximately 3 billion oil-equivalent barrels of resource potential, Concho Resources’ asset portfolio is primed for high production growth and peer-leading returns.” Cimarex Energy (XEC) is also a top Permian Basin company and may be a better value today.

Continental Resources (CLR) is approaching my Fair Value Estimate, but it probably deserves a higher multiple than what I’m using. I will be taking a very hard look at their report on the SCOOP play, which will also impact NFX and GST.

Along with CLR, Devon Energy (DVN), EOG Resources (EOG) and Range Resources (RRC) are all “Core Holding” quality stocks.

Gulfport Energy (GPOR) may have the most to gain from a strong 2nd quarter report. I doubt production will be up very much from Q1, but if management confirms their full-year production guidance (250% YOY growth), the share price should move higher. A recent report from the State of Ohio shows that GPOR is completing some of the best Utica Shale wells. [ I am now very bullish on what Gastar Exploration (GST) has going in the Utica Shale.]

Matador Resources (MTDR): the pull-back is a good buying opportunity. Production should ramp up sharply over the next two quarters.

NewField Exploration (NFX): Finding a buyer for their China assets would give this stock a big boost. Analysts will be focused on results in their STACK play in Oklahoma.

Oasis Petroleum (OAS): KLR Group raised their price target $9 to $66. More analysts will raise their targets after they see Q2 results and management confirms production guidance.

On July 10, Investor Business Daily included SN in their Top Five Small-Caps based on fundamentals. Here is what they had to say: “Oil and gas explorer Sanchez Energy (NYSE:SN) is part of the new shale-oil and natural-gas boom. The Houston-based company has fracking operations in South Texas. In May, it bought an additional 106,000 acres in South Texas' oil-rich Eagle Ford shale fields. Its three-year EPS growth rate is 205%, and its sales growth rate is 52%. Last quarter, EPS rose 46% to 19 cents. Sanchez, whose shares are also on the IBD 50 list of top-rated stocks, eased fractionally.”

SM Energy (SM) looks like a Screaming Buy to me under $80. First Call’s target price is drifting higher and now stands at $94.65. I still think it is worth a lot more.

Unit Corp (UNT) is listed as an onshore driller, but most of their revenues come from the E&P division. BTW the outlook for the drillers is looking darn good to me. Drillers I like are listed on our Drillers Watch List, which you can find under the Watch List Tab.

Whiting Petroleum (WLL) and OAS are my Top Picks for the Bakken. I also like TPLM, a pure play on the Bakken.