Sweet 16 Update - Feb 18

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dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Sweet 16 Update - Feb 18

Post by dan_s »

All of the Sweet 16 took a beating on Friday, February 17 as "Fear of the Fed" continues to convince investors that our government wants a recession. Unless we see a big increase in the unemployment rate, I don't see a recession on the horizon. Instead of raising interest rates maybe our government should just quit throwing piles of money at every green energy idea.
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During the week ending February 17th the Sweet 16 lost 8.45% and is now down 6.93% YTD.
The S&P 500 Index lost just 0.3% and is now up 6.24% YTD.

AR, CRK, EQT and MGY all reported strong Q4 results and increases in their proven reserves. I updated my valuations based on their fresh guidance for 2023.

I also updated my valuations for ESTE, ROCC, RRC and SM.

Earthstone Energy (ESTE) provided a detailed operations update, reporting Q4 production of 104,766 Boepd that beat their previous guidance of 100,000 Boepd. Earthstone is the most aggressive growth company in the Sweet 16, closing three large acquisitions in 2022 that more than tripled their production year-over-year. The Company generated over $1 billion of operating cash flow in 2022 and based on my updated forecast they should generate close to $1.2 billion of operating cash flow in 2023 ($8.44 per share) and over $400 million of free cash flow this year.

I updated Ranger Oil (ROCC) and SM Energy (SM) just because I needed to extend the forecast through 2024.

I updated Range Resources (RRC) for the lower natural gas prices that I am now using in all of my models ($2.50 in Q1, $2.75 in Q2, $3.25 in Q3 and $3.50 in Q4). If you watched the replay of the AEGIS webinar you know that the NYMEX strip prices for Henry Hub gas is now in steep contango. The DEC23 contract closed yesterday at $3.81. I will be discussing why this has happened in today's podcast.

SilverBow Resources (SBOW) is no longer listed on the Sweet 16 summary page as a "gasser" because this year's revenues will come primarily from liquids sales.

The Sweet 16 summary spreadsheet will be posted to the EPG website later this afternoon. It shows my updated valuation and First Call's current price target for each stock. Detailed forecast models for each company can be found under the Sweet 16 tab.

Next week Q4 results and fresh guidance will be coming at me like water from a fire hose. I will do my best to keep up.
Dan Steffens
Energy Prospectus Group
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