Sweet 16 Update - June 22

[dan_s]

I am doing this on Friday evening because my wife has organized a group wine tasting "excursion" for Saturday. Those of you who know Susan know that she is the "Trip Coordinator". She's organized 8 EPG group cruises and 21 luxury villa trips to Puerto Vallarta. I have zero say so on these trips. "Day Drinking" and a good lunch in the Texas Hill Country with a group of our close friends does sound good to me.

My goal is to publish the next "The View from Houston" newsletter on June 26, the day after our next webinar.

The Sweet 16 gained 1.13% during the week ending June 21 and it is now up 5.61% YTD, not including dividends.
The S&P 500 Index gained 0.75% during the same week and it is now up 14.29% YTD. Definitely a good year for the equity markets.

SilverBow Resources (SBOW) leads the pack, up 29.06% YTD, followed by SM Energy (SM) that is up 24.74% YTD, Diamondback Energy (FANG) up 23.08% YTD and Magnolia Oil & Gas (MGY) up 16.63% YTD.,

Crescent Energy (CRGY) looks like a Screaming Buy to me. It is trading at an 89.7% discount to my valuation of $22.00, and I love the merger with SBOW. First Call's price target is $18.60.

APA Corp. (APA) at $28.09 is down 18.2% YTD. Q2 2024 results should be strong; it will be the first full quarter since the merger with Callon Petroleum (CPE). APA is on pace to generate $1.5 billion of free cash flow this year AND TipRanks forecast is actually higher than my forecast. It is going to be interesting to see how the Wall Street Gang reacts to APA's Q2 results. In the last 3 months, 18 ranked analysts have submitted 12-month price targets for APA to TipRanks. The average price target among the analysts is $37.41. What jumps out is that the 18 price targets range from $27 to $57; an extremely wide valuation gap for a company of this size. I expect the average price target to move toward my current valuation of $48.00.

All 16 companies should report solid Q2 results since oil and natural gas price are higher from Q1 to Q2 and most of them will report production increases.

We still have profiles to update on four of our model portfolio companies (SOI, HMENF, IPOOF and PAA). All of them pay very nice dividends. I hope to finish them on Monday or Tuesday.

[Fraser921]

What do you think of VTLE? Trading near a one year low after the merger trashed the stock from 63 to 42

[ChuckGeb]

David Hay recently named APA as his energy pick he was watching for it’s price/valuation gap he expects to close and for its profitability and cash flow. BTW his Substack subscription is currently half off which is a really good vale.

[ChuckGeb]

Kimmeridge has virtually exited their 13% stake in SBOW. They picked up their marbles and went home.

[dan_s]

My $105/share valuation of VTLE is just 3.25 X 2023-2025 annualized operating cash flow per share. I can't see anything that justifies a lower valuation multiple. It does not pay a dividend, which is the only negative that I see.
Q1 2024 results beat my forecast. Well results have been good. Balance sheet is in decent shape.

[Fraser921]

Thanks, might be a good entry here at low 40's