Ten of the Sweet 16 (AR, CPE, CXO, DVN, EOG, FANG, NFX, PE, PXD and RRC) have reported Q2 results. All of them reported results that were fairly close to my forecast.
Devon Energy (DVN) and Parsley Energy (PE) had the most impressive results.
I have updated all of the forecast models for these ten companies and the are now available on the EPG website under the Sweet 16 tab. You must log on to view them.
I have tried to be extremely conservative in my forecasts and I've built some "cushions" into my cash flow per share forecasts.
Sweet 16 Updates - August 4
Sweet 16 Updates - August 4
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Sweet 16 Updates - August 4
You should all listen to the Pioneer Natural Resources (PXD) Q2 conference call and follow along on their slide.
A lot has been made recently about the increasing percentage of PXD's production being natural gas vs crude oil. On the presentation the company explains that, in the long run, this is a good thing. Because of the strong gas drive, the wells are producing above the pre-drill type curve, will produce more BOEs with the same amount of oil. So, the increased natural gas and NGL production just means higher revenues.
Some analysts seem to interpret this as more gas production driving out oil production and therefore the Permian Basin companies may be overvalued. This is not the case, as PXD clearly explains on the CC webcast.
Also on the call, it is clear that PXD's production growth this year is "back end loaded". They completed a lot of Q2 wells in June, which will give Q3 a nice pop in production. To hit their production guidance (15% to 16% YOY growth), they will exit this year with production well over 300,000 BOE per day. 2018 is shaping up to be a very good year of production growth because they will start the year at a very high level.
PXD has a SUPER STRONG balance sheet. Cash on hand + cash flow from operations will fully fund this company's drilling program through 2018 and for many years to come.
After listening to the CC, I have "tweaked" the forecast model. My valuation of PXD is now $196/share, which compares to First Call's price target of $205.82.
A lot has been made recently about the increasing percentage of PXD's production being natural gas vs crude oil. On the presentation the company explains that, in the long run, this is a good thing. Because of the strong gas drive, the wells are producing above the pre-drill type curve, will produce more BOEs with the same amount of oil. So, the increased natural gas and NGL production just means higher revenues.
Some analysts seem to interpret this as more gas production driving out oil production and therefore the Permian Basin companies may be overvalued. This is not the case, as PXD clearly explains on the CC webcast.
Also on the call, it is clear that PXD's production growth this year is "back end loaded". They completed a lot of Q2 wells in June, which will give Q3 a nice pop in production. To hit their production guidance (15% to 16% YOY growth), they will exit this year with production well over 300,000 BOE per day. 2018 is shaping up to be a very good year of production growth because they will start the year at a very high level.
PXD has a SUPER STRONG balance sheet. Cash on hand + cash flow from operations will fully fund this company's drilling program through 2018 and for many years to come.
After listening to the CC, I have "tweaked" the forecast model. My valuation of PXD is now $196/share, which compares to First Call's price target of $205.82.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Sweet 16 Updates - August 4
Everything closed in the green on Friday, but we have a lot of work to do.
If you believe that WTI will eventually settle at a fair price over $50 (IMO the "fair price" is in the $60 range), then the Sweet 16 and all of our model portfolio companies are grossly oversold.
If you believe that WTI will eventually settle at a fair price over $50 (IMO the "fair price" is in the $60 range), then the Sweet 16 and all of our model portfolio companies are grossly oversold.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group