spread sheets

[mkarpoff]

I know you and your interns work your butts off to create your spreadsheets but, I admit, they make my eyes cross. Might you distill them into a more simple summation per company, giving the salient points at different oil/gas price points? Thx.

[dan_s]

My wife tells me all the time "Dan, you need to remember that everyone is not a CPA."

Here is what you need to focus on in each forecast spreadsheet.
1. The "actuals" for all prior periods are locked in. They come directly from each companies' SEC filings.
2. Most of the forecast period revenues and expenses are driven by macros (formulas built into the Excel spreadsheets)
3. Near the bottom of each forecast model (around row 50) are the daily production volumes; actuals for prior periods and forecasts for future periods.
4. Right below the production volumes are product prices. Forecast periods include the impact of hedges and regional price differentials (my guess at future "realized" prices)
5. Any changes you make to forecast period production volumes or product prices will automatically adjust most of the revenue and expense lines in the income statement above.

As simple as I can make it: The forecast models are standard Income Statements + Cash Flow From Operations are shown right below net income. Cash Flow Per Share is a macro driven number, you can see the formula if you click on the cell. Basically CFPS is just (Net Income + Non-Cash Expenses) / Number of shares.

There are a lot of funky accounting rules for E&P companies. The most confusing to most non-accountant investors are the mark-to-market adjustments on hedges (derivatives) and differences between companies that use Full Cost Accounting and Successful Efforts Accounting. Most companies also report "Adjusted Earnings", a non-GAAP number that is comparable to First Call earnings forecasts.

There are no stupid questions here, so let me know if you need more clarification.

[dan_s]

One more thing. It is VERY IMPORTANT to remember that "Cash Flows From Operations" are much more important than "Net Income". Cash pays the bills, not earnings.

[prince_jake_33]

Dan I don't have excel Could you also post PDFs, I had excel but I had to replace my computer and lost excel thanks

[dan_s]

The profiles are pdf. The forecasts are on the last page of each profile.

You need to invest in the latest Microsoft suite so you can download the Excel and PowerPoint presentations we post to the website.

[mkarpoff]

Huh? I feel like Penny on the Big Bang Theory. Those that are addicted to the show will know what I mean. Maybe it's me. I guess I will just have to use the "View.." as my guide. Thanks.

[setliff]

for those that are not comfortable with excel spread sheets and their manipulations I would recommend tab 2 of the "sweet sixteen growth portfolio". this is found under the "sweet sixteen tab" on the home page and the link is "sweet sixteen forecasts".

while this is on excel there are no macros and you can use an excel viewer which is available free on the Microsoft website, as is power point viewer.

[dan_s]

If any of you want me to walk you through a particular forecast model, just call me at 281-435-8874.

I know when you first bring up a forecast model it just looks like a bunch of numbers, but they are all quite simple.
> They are just Revenues - Expenses = Net Income.
> To arrive at Cash Flow From Operations, I just add back the non-cash expenses (DD&A, Impairment, Stock Based Compensation, non-cash mark-to-market on hedges and Deferred Income Taxes are the big ones).

I have been doing financial modeling for several decades, so it is actually quite easy for me to forecast an E&P company. The problem today is that no one has confidence in the price of oil and gas.

[grimaldi]

I feel exactly the same way--- I just wait for the View to come out before selling or buying any of these. At least Penny is good looking.

[mkarpoff]

Perhaps I am a fine looking specimen as well. I guess you would have to ask my wife.

[ghrcap]

"The problem today is that no one has confidence in the price of oil and gas."

This is the obvious rub.

I noticed Johnson Rice today, for example, lowered their 2015 price deck to $60 for WTI and $3.25 for natural gas.