S-16 Update - Nov. 23

[dan_s]

I have FINALLY caught up to all the Q3 results and fresh guidance.

> All of the forecast/valuation models for the Sweet 16, Small-Cap Growth, and High Yield Income Portfolio companies are now up-to-date.
> All of the Sweet 16 profiles have been updated (EOG and FANG finished today).
> All 36 companies are in good financial shape, and they should all report Q4 profits and strong operating cash flow. The dip in oil prices will be offset by higher natural gas & NGL prices for most of them. Hemisphere Energy is the only pure oil company. It will report higher production from Q3 to Q4.

It was a good week for the Energy Sector and for stocks in general:
> The Sweet 16 gained 5.93% during the week ending November 22 and it is now up 7.32% YTD.
> The S&P 500 Index gained 2.06% during the week and it is now up 24.78% YTD. A few large-cap tech stocks fuel most of this year's gains. See Note Below.

As I posted earlier today, EQT Corp. (EQT) has moved over my current valuation of $43.00, so I rate it a HOLD only for those of you that are bullish on natural gas prices. Even if you are, I see more upside in Coterra Energy (CTRA), Crescent Energy (CRGY), Devon Energy (DVN) and Ovintiv (OVV) should natural gas prices rally in 2025 (which I do expect to happen in 2H 2025).

APA, BTE, DVN, VRN and VTLE are all down YTD. I see nothing that justifies this year's poor performance. BTE, VRN, and VTLE are all trading below book value. These are all profitable companies, they are all free cash flow positive, and they have plenty of Running Room to keep growing production. HFI Research now lists Veren (VRN) as one of their Top Picks. My current valuation of VRN is 93% higher than where it closed on November 22.

EOG Resources (EOG) and Magnolia Oil % Gas (MGY) are getting close to my current valuations, but they are fine and probably deserve higher valuation multiples.

APA Corp. (APA) has some BIG upside in Suriname that is not being appreciated by investors YET.
APA took a hit because they reported a big impairment charge related to their North Sea assets. APA has not abandoned those assets which are still producing. APA won't abandon them until after 2029.
It is possible that if oil prices firm up, another company might buy them from APA. APA is not going to invest in the North Sea when they have so much more upside in the Permian Basin, Egypt and Suriname. They've made the right decision.

The Sweet 16 Summary Spreadsheet will be posted to the EPG website on Sunday. It is a three-tab Excel "book" that contains a lot of valuable information. It is VERY IMPORTANT that you know the production mix and hedging policies of each company. You can find the production mix on Tabs 2 and 3 of the Summary Spreadsheet and hedge details at the bottom of each companies' forecast model.

Our next live webinar is set for Tuesday, November 26 at 1:30pm CT. Doug Bartole, CEO of InPlay Oil will be joining me and we will take general questions about the Canadian energy markets. You must register to attend the live webinar.

[dan_s]

The Magnificent Seven—Alphabet, Amazon, Apple. Meta, Microsoft, Nvidia and Tesla—are about one-third of the S&P 500 and account for about half of the S&P 500’s gains this year.

[knusser58]

Hi Dan,
have you posted the Sweet 16 sheet?
Regards,
Klaus

[dan_s]

My bad. I will post it in a few minutes.

You can download it from the home page.

[knusser58]

Thank You