High Yield Income Portfolio Update - Mar 31

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

High Yield Income Portfolio Update - Mar 31

Post by dan_s »

I have updated all five of the upstream company forecasts (CTRA, DVN, FANG, PDCE, PXD) and you can download them directly from the EPG website home page or you can find them under the High Yield Tab.

They are all large-caps that I have followed for more than ten years.
> They all have rock solid balance sheets with no near-term debt issues.
> They all generate a lot of free cash flow from operations.
> They all pay "Fixed + Variable" dividends. You can find my estimated dividends for 2023 at the bottom of each forecast.

Coterra Energy (CTRA) is the only "gasser" in this group, so its dividends will be down the most this year. The other four should maintain their dividends close to what they paid out last year. Based on my forecasts, PXD should generate the highest dividend yield this year, over 10%.

Next on today's long To Do List are the forecasts for the four minerals companies (BSM, KRP, STR, VNOM)
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: High Yield Income Portfolio Update - Mar 31

Post by dan_s »

I have updated my forecast/valuation models for all four of the minerals companies (BSM, KRP, STR, VNOM)

Black Stone Minerals LP (BSM) is a Master Limited Partnership (MLP). It is the most heavily weighted to natural gas, but they do hedge a high percentage of their production each year. I do expect them to hold their quarterly cash distributions to $0.475/unit for annualized yield of 12.2% based on today's unit price. This is a very conservative management team so the Company has a Super Strong balance sheet. It is a safe bet for any of you that believe natural gas prices will rebound later this year. Plus, you get paid some very nice dividends while you wait.

Kimbell Royalty Partners (KRP) has elected to be taxed as a C-Corp. It is smallest of this group and it is "gassy", so their variable dividends will be coming down a bit this year. I expect the dividends to total $1.28/share for the year 2023. If natural gas rebounds to $3.50/mcf in 2024, KRP's dividends could go over $2.00/share next year.

My Top Pick in this group is Sitio Royalties Corp. (STR). They closed the merger with Brigham Minerals late in December, so Q1 will be the first full quarter of combined results. If actual results match my forecast, I expect it to get a lot more "love" from the Wall Street Gain. Current production is ~34,500 Boepd (~50% crude oil + 16% NGLs) and it has a lot of "running room". In my opinion, the current share price is $10 below "Fair Value".

Viper Energy Partners LP (VNOM) is the "Safe Bet" because it has steady production growth locked in by the relationship it has with Diamondback Energy (FANG). Diamondback has one of the most aggressive drilling programs in the Permian Basin and lots of their leasehold is Tier One. Lots of their rigs are running on leasehold where Viper holds the minerals. Viper is virtually unhedged, so I view their commodity price risk to be to the upside.
Dan Steffens
Energy Prospectus Group
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