Sweet 16 Update - Dec 24

[dan_s]

Merry Christmas! Its been a good year for the Sweet 16 and 2017 is shaping up to be a rebound year for the U.S. oil & gas industry.

The Sweet 16 was down 1.39% for the week ending December 23. It is up 49.83% YTD. With oil prices ending the week about where they started and natural gas prices moving higher, this week's dip is probably just fund managers locking in some gains for the year before they head off on vacation. If commodity prices hold up, look for some bargain hunting next week.

The natural gas storage level will dip below the 5-year average next week, which should draw some attention.

I have raised my valuation of SM Energy (SM) to $60/share.
I like the Gulfport Energy (GPOR) SCOOP acquisition. When the market over-reacts to big deals like this, it is usually a great buying opportunity. Gulfport's production growth is going to be 30% YOY in 2016 and s/b close to 50% YOY in 2017. Their 2017 exit rate should be close to 200,000 Boe per day. Most of the Wall Street Gang is not aware of Gulfport's size and their strong track record. GPOR's production is triple that of FANG, yet it has less than half the market-cap of FANG.

With higher oil & gas prices at year-end, we should see some significant increases in proven reserves. Higher commodity prices extend the economic limits of wells and increase recoverable reserves. More proven reserves lowers the DD&A rate, increasing reported earnings.

Continental Resources (CLR) leads the pack, up 128% YTD. Their wells in SCOOP and STACK just keep getting better.

I will be back at work on Tuesday.