Sweet 16 Portfolio Update - April 6

[dan_s]

During the week ending Friday, April 5 the Sweet 16 gained 5.09% and the portfolio is now up 19.34% YTD.
During the same week the S&P 500 Index lost 1.05% and is now up 8.79% YTD.

Since a low WTI price of $68.42/bbl on 12/12/2023, the WTI oil price has gained 26.8% to yesterday's closing price of $86.78/bbl. U.S. natural gas prices have gone in the opposite direction during the same period. Crude oil prices are set by global supply/demand fundamentals and natural gas prices are set by regional fundamentals. The U.S natural gas market is over-supplied, but market forces are working to rebalance it by the time the next winter heating season rolls around.

I have raised the oil prices and lowered the natural gas prices used in my forecast/valuation models. All of the forecast models for the Sweet 16 companies have been updated and they are now available on the EPG website. All 16 stock valuations have been adjusted.

Range Resources (RRC) closed at $35.03 on April 5. It is now 14.4% above my valuation, so I will be removing it from the Sweet 16. RRC is a "Gasser", so my lower ngas forecast lowered my valuation by $1.50 to $30.00 per share. Since 1/1/2021 RRC has gained 423% and it is now time to harvest that gain.

I will be taking a hard look at APA Corp. (APA) this coming week. APA closed the merger with Callon Petroleum (CPE) on April 1st. My proforma forecast values APA at $50/share. It closed at $35.47 on Friday.

I am also considering moving Talos Energy (TALO) back to the Small-Cap Growth Portfolio. Talos is a pure play on the Gulf of Mexico and I am concerned with hurricane risk. The National Weather Service is now forecasting a very active hurricane season this summer, with several named storms now expected to impact the GOM.

SM Energy (SM) is now leading the pack, up 36.26% YTD. Permian Resources (PR) up 31.84% YTD and Diamondback Energy (FANG) up 31.75% are in a tight race for 2nd place.

FANG at $204.32 is only 4.2% below my valuation of $213.00 and it is now over First Call's price target of $202.79, but the Wall Street Gang loves this stock, so it could go quite a bit over my valuation. FANG has "World Class" running room in the Permian Basin. It also pays nice dividends.

Overall, the Sweet 16, including RRC, is still trading at a 30.23% discount to my estimated fair value estimates. Still trading at more than 70% below my valuations are Baytex Energy (BTE), SilverBow Resources (SBOW) and Vital Energy (VTLE).

Oil prices in Canada are getting a nice boost from the Trans Mountain Pipeline, which is now filling up. Oil price differential are falling in Canada, so I think BTE has the most near-term upside.