Sweet 16 Update - April 11

dan_s · Post by **dan_s** » Sat Apr 11, 2020 1:56 pm

I can't remember the last time that I said "The Sweet 16 gained 12.8% for the week ending April 10, 2020, beating the S&P 500 Index that was up 12.1%".

In Crazy Coronavirus World we get wild swings in the market. Maybe we've moved into Day Trader Heaven.

Range Resources (RRC) gained 42% on the week closing at $3.75 and moving over the First Call price target that is $3.36. Range reduced its 2020 all-in capital budget from $520 million to $430 million and still expects to maintain production at approximately 2.3 Bcfe per day for 2020. Investors love capex spending cuts these days. The Wall Street Gang is also starting to come around to the idea that the U.S. natural gas market will be much tighter heading into the next heating season. EIA announced that they see U.S. ngas production declining by 7 Bcfpd this year. Low gas price during the summer should increase demand for power generation and LNG exports should be going up.

Oasis Petroleum (OAS) was the only stock down. The share price only declined 4 cents, but that is a 10.5% drop since April 3. Q1 results should be good, but Oasis has none of their oil hedged beyond Q2. If the oil price doesn't rebound Oasis will be on life support in Q3. This one is only for those of you that believe President Trump will make some moves to support our domestic upstream companies. My valuation is based on WTI moving over $50 within twelve months. This is a well written analysis of where OAS stands today: https://seekingalpha.com/article/433681 ... pportunity

There has been a lot of negativity toward Callon Petroleum (CPE), but I recommend that you read their March 17th press release. Every one of the Sweet 16 will be grasping for air if WTI is $25/bbl a year from now.
I've updated my forecast/valuation model for CPE and OAS today. The models will be on the EPG website late today.

Continental Resources (CLR) is the only Sweet 16 company that has none of its oil hedged. They announced steps to "hunker down" and live within cash flow from operations and Wall Street liked the news.
CLR gained 34.25% last week.

Small-Caps always have more RISK, but all of these company have the ability to survive Crazy Coronavirus World if they hunker down to "Survive in 2020, so they can Thrive in 2021." Hey, that's a good plan for all of us.