Sweet 16 Update - May 11

[dan_s]

All 16 companies have now released Q1 results and updated guidance. All 16 companies generated solid Q1 Adjusted Net Income, after you back out the non-cash mark-to-market adjustments on their hedges. < The most misleading SEC/GAAP accounting rule ever dreamed up.

Our focus is on production volumes, production mix, quality of "Running Room, adjusted operating cash flow and free cash flow.

I have updated my forecast/valuation models for all 16 companies. I just finished updating Crescent Point's model, so it will be posted to the EPG website later today. The other 15 are already under the Sweet 16 tab.

For the week ending May 10 the Sweet 16 lost 0.81% and it is now up 11.71% YTD.

All of the week's losses came on Friday thanks to the "noise" that is keeping pressure on global oil prices. U.S. natural gas prices have gain 12.6% during the last four weeks. Natural gas prices in Europe and Asia are now $9.77 and $10.46. With more LNG export facilities coming online soon, the U.S. natural gas price will drift toward those prices, less processing and transportation costs of under $2.50/mcf.
The DEC25 NYMEX contract for HH gas closed at $4.17/MMBtu on Friday.

During the same week the S&P 500 Index gained 1.98% and is now up 9.17% YTD.

I am going to highlight the Sweet 16 during my podcast, so I won't spend too much time on it here. See my posts under this tab for my detailed comments on each company's Q1 results.

Diamondback Energy (FANG) has regained the lead, up 30.38% YTD.
Rounding out the top four are SM Energy (SM) up 26.96%, Crescent Point Energy (CPG) up 25.54% and Permian Resources (PR) up 21.84%.

Crescent Point (CPG) is drawing a lot of attention with a solid first quarter and announcing a non-core asset sale that will bring in $600Cdn million, which will pay down a large percentage of their debt. At the end of June, Crescent Point's balance sheet will be in very good shape and this company has a lot of running room. Baytex Energy (BTE) and CPG are both going to get much better prices for their oil in Q2 thanks to the TMX pipeline completions impact on oil price differentials in Western Canada.

Vital Energy (VTLE) reported another solid quarter as Q1 production beat my forecast. It trades at the largest discount to my valuation, which increased to $105/share.

If you are bullish on natural gas, EQT Corp. (EQT) pulled back below $39, which is an attractive entry point IMO. They've locked in free cash flow with hedges this year. If ngas prices do crawl back over $3.00, EQT will be a very profitable company in 2025.