Sweet 16 Update - Sept 10

[dan_s]

The Sweet 16 was down 1.14% for the week ending Sept. 9th because of Friday's selloff, but the portfolio is still up 46.52% YTD. This compares to the S&P 500 Index that was down 2.55% last week and is now up just 4.11% YTD.

All of the Sweet 16 are up YTD. Here are the leaders:
CLR up 117.36% thanks to outstanding results in SCOOP and STACK
SM up 83.57%
PE up 82.28%
RRC up 71.64%

AR, EOG and RRC had the best weekly gains. All others were flat to down slightly. AR and RRC getting some "love" from Wall Street because other analysts are beginning to see what I have been telling you for months > The natural gas prices are getting ready to firm up nicely as the U.S. gas market is getting tighter each day. EOG also produces a lot of unhedged gas, but Wall Street also likes their BIG Permian Basin acquisition. My valuation of EOG is $104/share, but I expect it to go up after we get more guidance from EOG on how aggressively they are going to develop the Yates leasehold.

I have recently increased my valuations of AR, XEC, FANG and PDCE.

If you read my recent profile on EQT Corporation (EQT), you know that I want to add it to the Sweet 16, but nothing deserves to get dropped. FANG is getting close to my valuation, but I hate to drop a Wall Street favorite.

Gulfport Energy (GPOR) appears to have the most near-term upside, followed closely by AR, DVN, PDCE and SM. Gulfport is a "gasser" that is off the Wall Street radar screen. I think it will be higher at year-end because production should be up quarter-over-quarter in Q3 and they will announce a big jump in production coming in Q4, just before winter heating season. Combine that with increasing gas & NGL prices and GPOR should draw a lot more attention. Revenues from oil, gas and NGL sales should go from $170.4 million in the 2nd quarter (including cash settlements on hedges) to over $222.7 million in Q4. I am now forecasting revenues of more than $1Billion in 2017, much of which is locked in by hedges.

Antero Resources (AR) has more than 100% of forecast gas production hedged at $3.86 for Q3, $4.01 for Q4 and $3.63 for 2017.

Devon Energy (DVN) is closing asset sales that will have the balance sheet in good shape at year-end and they have great leasehold in STACK, where they will focus most of their capex program in 2017.

PDC Energy (PDCE) and SM Energy (SM) both have strong cash flow from operations today and their new leasehold in the Permian gives them both many year's of production growth.

Next week the International Energy Agency (IEA) will release their monthly Oil Market Report. I am looking for confirmation of their view that the global oil market is tightening. OPEC's new "interest" in curbing production is all talk now, but even those knuckleheads know by cutting production just a bit they can increase their revenues a lot. To anyone who took Finance 101, this "Market Share War" makes no sense, but we all know that what Saudi Arabia does is more about hurting Iran. I think there is a 50/50 chance something comes out of the late September meetings in Algeria.

There are several tropical waves heading toward the U.S. that energy traders will be keeping an eye on next week. The first one appears to have the best chance to go south of Cuba and enter the Gulf of Mexico. If so, a lot of production will be shut-in and tankers will avoid the area.

Weather forecasts are for summer like temps to stay in the South and up the East Coast well into October. This is bullish news for natural gas prices as it will keep demand up for power generation. I will discuss this in the weekend podcast.

Some of our Small-Caps are drawing more attention because of Wall Street focus on the Permian Basin after Apache (APA) announced their big discovery ("Alpine High") and EOG's big acquisition. CPE, CRZO, ESTE, LPI, MTDR and REI all have core areas in the Permian. CPE and LPI are "pure plays" on the Permian.

Hang tough, we are definitely in the recovery phase of this cycle.

[bearcatbob]

What does GPOR sell its gas for?

[dan_s]

You can find the realized commodity prices (oil, natural gas and NGL) for each company at the bottom of their forecast models.

Log onto the EPG website, click on the Sweet 16 tab and then click on the Gulfport.

"Teaching a man to fish is better than giving him a fish".