Sweet 16 Update - March 9

[dan_s]

Susan & I are safely back from a relaxing vacation in Puerto Vallarta. Perfect weather and very good food. We saw whales jumping out of the water at least 30 times directly in front of our villa. A mother and her baby put on quite a show yesterday afternoon. It never gets old.

During the week ending March 8 the Sweet 16 gained 0.43% and is now up 6.04% YTD.
The S&P 500 Index lost 0.27% and is now up 7.11% YTD.

Devon Energy (DVN) and EOG Resources (EOG) had good weeks.

Diamondback Energy (FANG) continues to lead the pack, up 18.19% YTD. Permian Resources (PR) up 17.35% and SM Energy (SM) up 16.40% are putting pressure on the leader.

One of our two "gassers", Range Resources (RRC), is the only stock trading above my current valuation. It is a rock solid company with no near-term debt problems, but natural gas prices have a lot of work to do before I can recommend the gassers. I need to spend some time on my forecast for EQT Corp. (EQT), which recently announced a production cut.

I have 9 updated profiles sitting here for my review. Nataly, Cas and Steven (our MBAs) were busy while I was on vacation.

The WTI oil price seems to be building a support level at $78 and with demand for transportation fuels increasing, my forecast of $80 WTI during Q2 looks good.

Trading Economics: "WTI crude futures settled 1.17% lower at $78.01 per barrel on Friday, resulting in a 2.45% loss for the week. Market sentiment remained cautious regarding Chinese demand, despite the OPEC+ group extending supply cuts. Supplies have remained relatively tight due to OPEC's production cuts and sanctions slowing Russian exports. There are concerns about lagging demand from China, as oil imports fell approximately 5.7% to 10.8 million barrels per day in the first two months of the year, compared to 11.44 million bpd in December. Also, Federal Reserve Chair Jerome Powell's indication of potential interest rate adjustments bolstered the outlook for global growth and energy demand. Meanwhile, TC Energy Corp. confirmed the Keystone pipeline's integrity after a brief halt, with no crude oil leakage, alleviating immediate supply concerns."

HH natural gas prices remain under $2.00, but I do expect them to drift higher as market forces are working to balance supply & demand for U.S. natural gas.

Trading Economics: "US natural gas futures fell to $1.8/MMBtu following the EIA's storage draw report. Government data showed US utilities pulled 40 billion cubic feet of natural gas from storage last week, in line with market expectations. The report also showed gas in storage is 30.9% above the seasonal norm. Despite this, natural gas prices are set to rise for the third consecutive week as EQT announced a nearly 1 billion cubic feet per day reduction in production until March due to persistently low natural gas prices. Chesapeake Energy also cut its 2024 fuel production by around 30% due to recent price drops. Antero Resources and Comstock Resources are among other firms planning drilling cutbacks this year. Meanwhile, gas flows to US LNG export plants have been following and are not expected to fully recover until Freeport LNG resumes full operations, possibly in mid-March."

We will be sending out updated profiles on nine of the Sweet 16 this week: BTE, CPG, DVN, EOG, MTDR, OVV, PR, SBOW, TALO

All 16 companies are in good shape: Generating free cash flow and executing their drilling programs.

[dan_s]

My current valuations are shown on the Sweet 16 Summary Spreadsheet, which is updated each weekend. You can find it under the Sweet 16 Tab after you log on. You can download it to your computer.
There are three tabs. The 3rd tab shows the companies in our Small-Cap Growth Portfolio and out High Yield Income Portfolio.