Sweet 16 Update - Feb 12

[dan_s]

Susan and I got back from Mexico late on Saturday. We had a great time in Sayulita, which is a small town north of Puerto Vallarta. See pictures at this link:
https://www.boutiquevillas.com/destinat ... an-pancho/

During the week ending February 10th the Sweet 16 gained 4.01% and the portfolio is now up 1.52% YTD.
Most of last week's gain came on Friday after Russia announced that they are going to cut production by 500,000 bpd in response to the EU's price caps. As I have posted here many time, the "Sanctions War" is going to hurt Europe more that it hurts Putin.
If China's economy heats up, we should see WTI over $100/bbl this summer.
Remember that demand for oil-based fuels is "seasonal" and Q1 is always the lowest demand for the year.

The S&P 500 Index lost 1.19% last week, but it is still up 6.54% YTD.
There is still plenty of FEAR of recession, but it seems to be fading a bit since most of the economic indicators remain positive. The unemployment rate remains low and it is hard to see a recession on the horizon if most of the people that want jobs are employed.

I still need to update the forecast/valuation models for CPG, NOG, ROCC, RRC and SM this week. The updated models will be posted to the EPG website shortly after I finish them. I hope to get NOG and RRC updated today.

AR, CRK, EQT and MGY will be announcing Q4 results this coming week. All of them should report strong Q4 results and big increases in their proven reserves.

Leading the portfolio are MTDR up 13.26%, CPE up 12.75%, PR up 11.91% and NOG up 10.67%

Down YTD are SBOW down 10.11%, CRK down 9.70%, AR down 8.58% and EQT down 6.38%. These are all "gassers" and the U.S. natural gas price has pulled way back since December due to the warmest January on record and the long delay in getting the Freeport LNG export facility back online (thanks to our federal government which wants to keep utility prices low).
> IMO SBOW is grossly oversold because it will report strong Q4 results and an increase in production from Q3 to Q4. SilverBow's Q1 revenues will be balanced between gas and liquids. The Company has already said they will focus this year's drilling program on raising oil production.
> CRK is the only one that is close to being a "pure gasser", so a long period of low gas prices will hurt it the most. Just keep in mind that ~50% of their 1H 2023 gas production is hedged with collars that have $3.00 floors and they are selling some gas into markets that pay higher prices than Henry Hub.
> Watch Joe Bastardi's cold forecast for March ("Saturday Summary") at this link: https://www.weatherbell.com/premium/
A stratospheric warming event is expected to push very cold artic air down into the eastern U.S. late in February. A repeat of the February 2018 weather will be bullish for natural gas demand.
> Freeport should be back online by the end of March.

On a per share basis, Callon Petroleum (CPE) and Vital Energy (VTLE) should be the two most profitable companies in the Sweet 16 this year. There is nothing that I can see which justifies their current share prices of less than 2X operating cash flow per share. Their revenues are heavily weighted to oil.

An updated Sweet 16 summary spreadsheet will be posted to the EPG home page before the Super Bowl kickoff.