Sweet 16 Update - April 15

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Sweet 16 Update - April 15

Post by dan_s »

During the week ending April 15th the Sweet 16 gained 4.3%, but the portfolio is still down 2.81% year-to-date.
During the same week, the S&P 500 Index gained 0.85% and it is up 7.77% year-to-date.

Permian Resources (PR) continues to lead the pack, up 19.47% YTD. It is followed by Northern Oil & Gas (NOG) up 13.76% YTD, Range Resources (RRC) up 8.95% YTD and Crescent Point Energy (CPG) up 8.81% YTD. CPE, ESTE, and VTLE have all moved into the green.

Ovintiv (OVV) is down 23.98%, Antero Resources (AR) is down 22.91% and Comstock Resources (CRK) is down 18.89%. All three can blame it on the big decline in natural gas prices this year. OVV's selloff this year makes no sense to me. TipRanks as of today: "In the last 3 months, 16 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $54.56." Last week three 5-Star energy sector analysts sent updated price targets to TipRanks of $48, $61 and $66. My current valuation is $63.

AR and CRK are much more weight to natural gas, so their selloffs are justified, but the long-range outlooks for both of them are very good.

SilverBow Resources (SBOW), down 10.85% YTD, continues to trade at the deepest discount to my valuation. I think it will report solid earnings for Q1 2023 despite a slight dip in production. Based on the Company's guidance, after Q1 they will report strong production growth with crude oil production going from 11,120 barrels per day in Q4 2022 to ~19,000 barrels per day in Q4 2023. My forecast shows SBOW generating Adjusted Net Income of $8.77 per share and Adjusted Operating Cash Flow of $19.62 per share. TipRanks' current consensus forecasts for 2023 is $12.64 EPS and $22.26 CFPS. Keep in mind that my forecast is based on oil prices that now look too conservative. In my opinion, there is nothing to justify this stock trading below 1.5 X operating cash flow per share.

CPE, ESTE and VTLE are others trading at less than 50% of my current valuations. All three are heavily weighted to oil.

My updated Sweet 16 Summary Spreadsheet will be posted to the EPG website later today.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Sweet 16 Update - April 15

Post by dan_s »

There is nothing to justify CPE, CPG, ESTE, VTLE and SBOW trading below book value. Profitable companies, generating lots of operating cash flow should never trade below book value. WHY? Because GAAP and SEC rules require upstream oil & gas companies to write down the book value of their oil and gas fixed assets to fair value (it is called impairment). All of these companies have PV10 Net Asset Values much higher than their current share prices.
Dan Steffens
Energy Prospectus Group
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