Sweet 16 Forecast Updates - April 21

[dan_s]

I am updating all of the forecast/valuation models this week. I am lowering the oil prices and raising the natural gas price assumptions. I do adjust for hedges and I'm assuming a lot of oil will be shut-in during May and June. Q1 results will be good but Q2 will be ugly.

CPE, CLR, CXO, XEC and PDCE were updated yesterday and posted to the EPG website.

ESTE, EOG, FANG, MTDR, OVV and OAS were updated today and will be posted to the EPG website this evening.

If you can't find them on the home page, just click on the Sweet 16 tab.

I'm now getting this question several times a day: Can Company X survive $10/bbl or $20/bbl oil?
The basic answer is that no upstream company or any OPEC cartel country can survive $10/bbl oil for long.
However, for each company it depends on the strength of their balance sheet, their hedging program and their production mix. "Gassers" are looking a lot better than they did a month ago.

For modeling purposes I have to make assumptions about oil, gas and NGL prices.
We now know that WTI averaged more than $45/bbl in Q1. I'm now assuming $20 for Q2, $30 for Q3, $40 for Q4 and $50 for 2021.
U.S. oil production will continue to fall even if WTI goes back to $50 tomorrow. It fell in December and again in January when WTI was over $60/bbl. The "cheap stuff" is gone.

I don't know where the price of oil will be a month from now. Nobody does. I believe the U.S. oil industry must survive because this world runs on oil and we will need a lot of oil after Crazy Coronavirus World goes away. We have no choice but to live with sickness like this and this "ain't paradise" my friends.

What you should all do is download a few forecast models to Excel and change the oil, gas and NGL price assumptions at the bottom to see how it impacts revenues, net income and operating cash flow. The forecast models are all easy to use macro-driven spreadsheets. Change any assumption at the bottom and the spreadsheet automatically updates.

PS: Take a look at where GPOR traded today. That is what can happen when there is just less FEAR.