Sweet 16 Update - October 20

[dan_s]

The Sweet 16 moved 1.54% lower during the week ending October 29th. It is now down 3.39% YTD, which is amazing considering that oil is up more than 40% in the last twelve months and the outlook for both natural gas and NGLs is MUCH BETTER. The Sweet 16 has a lot of exposure to the Permian Basin and the much talked about takeaway capacity issues and large oil price differentials in West Texas have put a cap on the share prices of some outstanding companies.

Last week

Earthstone Energy (ESTE) announced a BIG merger on Wednesday and I've raised my valuation $1.50 to $16.50/share.

Gulfport Energy (GPOR) announced a BIG increase in production that has this "gasser" on track to more than $2.00 EPS and more than $4.75 operating cash flow per share for 2018. At $11.09 per share Gulfport's PE ratio based on my forecast for 2018 s/b 5.3. This compares to the Sweet 16 average PE ratio of 22.16. Even more impressive, GPOR is trading at 2.32 X operating CFPS, which compares to the Sweet 16 average of 6.25X. < This is super low for a group of companies with this much growth locked in.

I expect a lot of the Sweet 16 to release operational updates next week.

Range Resources (RRC) will be the first to release Q3 financial results on October 23.

I will be working on the next edition of The View From Houston newsletter this week.

[dan_s]

Our Small-Cap Growth Portfolio is trading at a 78.4% discount to my valuation. My valuations are based on $65/bbl WTI for all future periods and $3.00/Mcf ngas for Q4 and $2.50/Mcf for 2019.

IPOOF, LPI and LONE are all trading at less than half of my valuation.