Sweet 16 Update - April 7

[dan_s]

During the shortened trading week ended April 6 (market closed on Good Friday), the Sweet 16 gained 3.5%, but it is still down 7.11% YTD.
The S&P 500 Index lost 0.11%, but it is still up 6.92% YTD.

Overall, it feels like Fear of Recession has faded to just fear of short-term economic slowdown in the U.S.
The current Sweet 16 stocks gained 263.7% during the two year's that ended December 31, 2022 and some profit taking and rotation to other beaten down sectors is understandable.

Permian Resources (PR) leads the pack by a wide margin, up 16.49% YTD. It closed April 6 at $10.95 and my updated valuation is $15.50.
CPG, NOG and RRC are up slightly YTD.

On the downside, two of the gassers are off the most: Antero Resources (AR) down 24.23% and Comstock Resources (CRK) down 24.14%. I do expect both of them to report positive net income for Q1 and both should report sufficient operating cash flow to cover their D&C expenditures. Comstock is going to report a big mark-to-market gain on their hedges.

The other two "gassers" are EQT Corp. (EQT), which is down only 5.05% YTD because it has a lot of production hedged for 2023. EQT has positive free cash flow locked in and it will report a very large MTM gain on their hedges in Q1.

Range Resouces (RRC) is actually up 5.36% because (a) I think it did not get the respect it deserved in 2022 and (b) more than 50% of Range's revenues this year will be from the sale of liquids. It should also remain free cash flow positive this year, even with low natural gas prices. Range also has a very high percentage of it Tier One leasehold held by production, so it can easily adjust its drilling program.

SilverBow Resources (SBOW) is trading at the deepest discount to my valuation of $78.00.
First Call's price target is $51.25 and the stock closed at $23.36 on April 6th, just 1.19 X my 2023 operating cash flow per share forecast of $19.62. You should all read our recent profile on SilverBow. It is an extremely profitable company ($15.51 EPS in 2022). Two analysts have recently submitted forecasts to Reuters/First Call that forecast 2023 EPS higher than my forecast of $8.77.

Five of the Sweet 16 are currently trading below book value: CPE, CPG, ESTE, VTLE and SBOW
> All of them were profitable in 2021 and 2022.
> All of them should be profitable in 2023. CPE, VTLE and SBOW should be in the top five most profitable on a per share basis.
> A profitable upstream company that is funding growth with operating cash flow should never trade below book value because SEC accounting rules require them to mark-to-market their oil & gas assets.

[dan_s]

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[Fraser921]

I see you, names are bouncing back today. Maybe rumored interest in PXD is helping and Ng rebounding helping the gassers