Sweet 16 Valuation Updates - Mar 30

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

Sweet 16 Valuation Updates - Mar 30

Post by dan_s »

I have finished updating my forecast/valuation models for all 16 companies using my revised oil & gas price decks.

Based on my forecast models, all 16 companies will be profitable in 2023. Yes, even the gassers.

On a per share basis, the three most profitable companies should be:
> Vital Energy (VTLE) with Adjusted Net Income per share of $16.56 and operating CFPS of $38.74
> Callon Petroleum (CPE) with Adjusted Net Income per share of $11.32 and operating CFPS of $22.58
> EOG Resources (EOG) with Adjusted Net Income per share of $11.14 and operating CFPS of $19.17

"Reported Net Income" in Q1 will be much higher than my forecasts for most companies because they will book large MTM gains on hedges. Reported Net Income has nothing to do with my valuations.

Comstock Resources (CRK) is the closest to a "pure gasser" with ~99% of their production being dry gas from the Haynesville and other East Texas zones. Comstock should still be profitable this year with Adjusted Net Income of $0.79 per share and operating CFPS of $2.91. They have plenty of liquidity and they will adjust their D&C spending to live within cash flow. Keep in mind that all of these companies survived long periods of low natural gas prices. Their cash operating expenses are way below $2.00/mcf.

SilverBow Resources (SBOW) is currently trading at the largest discount to my valuation of $78/share, which is just 3.5 X annualized operating cash flow per share. My updated operating CFPS forecast for 2023 is $19.62, which compares to TipRanks' current CFPS forecast of $22.10 for 2023. Nothing justifies SBOW trading at just over 1X operating CFPS. It is a very profitable company ($15.51 EPS in 2022) and production should be up more than 20% YOY. A high percentage of SilverBow's natural gas is hedged at much higher prices than the NYMEX strip, so they are more insulated than the other 15 companies from the dip in gas prices.

All 16 profiles have been updated on the EPG website.
Dan Steffens
Energy Prospectus Group
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