Sweet 16 Update - Oct 7

[dan_s]

The Sweet 16 was on-track to have a very good week until Friday. Investors were spooked by the thought of another significant hurricane hitting the Gulf Coast near New Orleans this weekend. With investors moving to the sidelines until the storm passes, oil prices and share prices moved lower. The Sweet 16 closed on Friday down 0.06% for the week.

Concho Resources (CXO) did more higher and is now up YTD; the only one of the Sweet 16 that is up YTD.

We are in the "Rebound Phase" of this oil price cycle. WTI is actually up 85% from the low for this cycle set in Q1 2016.

In the 2008-2010 oil price cycle, WTI moved up 236% from the low.

I do not think we will see a $100 oil price again this decade, but it will happen eventually. I do think we will see $60/bbl WTI within six months. I say this because OECD crude oil inventories are falling fast and the rate of decline will accelerate in the 4th quarter. I am expecting IEA's "Oil Market Report" (coming out next week) to confirm this.

All of the Sweet 16 profiles and forecast models are up-to-date. They can be found on the EPG website. Just log on and click on the Sweet 16 tab.

[dan_s]

Pioneer Natural Resources (PXD) now estimates that their new horizontal wells in the Permian Basin will deliver an internal rate of return between 40% and 75%, when assuming an average oil price of $50 per barrel and an average natural gas price of $3 per thousand cubic feet (Mcf) for the life of the well. This revised IRR estimate is based on version 3.0 completions that use more sand and targeted frac stages.

If you assume $60/bbl oil, IRRs go over 100%.

All of our other Permian companies will benefit from what PXD is doing.