Sweet 16 Update - Dec 21

[dan_s]

All 16 stocks were up for the week ending December 20, despite a bit of a pullback in oil prices on Friday.

5.27% gain for the week.

Five companies are now up YTD with Matador Resources (MTDR) posting the largest weekly gain. It is now up 10.24% YTD.

EOG Resources (EOG) is still down 5.2% YTD which is amazing considering the big improvement in the outlook for oil prices. Recall that last year on Christmas Eve WTI dipped to $42.50/bbl. If we see the big rotation of money into the energy sector in January that I'm expecting after the Phase One Trade Deal with China is signed, a lot of Wall Street money managers will be adding EOG as a core holding.

Callon Petroleum (CPE) closed the merger with CRZO on Friday. It is still trading at less than 2X operating cash flow, which is insanely cheap for a company of this size that has a ton of running room in the Permian Basin. Take a hard look at the Pro Forma forecast model that we email to members on Friday. Now that the merger has closed, there should be a slew of new analysts reports coming out on CPE.

Parsley Energy (PE) merger with Jagged Peak (JAG) s/b the next merger to close. With the PDC Energy (PDCE) merger with SRC Energy (SRCI) should also close in January. Size matters in this business and all of these mergers make a lot of sense.

Talos Energy (TALO) still has a ton of upside for us and they move to become a major Gulf of Mexico player. TALO is up 53.7% YTD in a very difficult market.

As a group, the Sweet 16 is still trading at just 3.5 X operating cash flow per share for 2019. 6X operating CFPS is more appropriate for a group of this quality and CFPS will be going up in 2020.