Sweet 16 for 2024 - Final Results

[dan_s]

The 2024 version of the Sweet 16 finished the year down 3.17% not including dividends. Including dividends, it gained about 2%. Since I published the first Sweet 16 in 2003, this is only the 3rd year that the Sweet 16 was down YTD. The results following the other two bad years (2008 and 2019) were gains of 54% in 2009 and 101% in 2020.

All 16 companies were profitable in 2024, and they are in very good financial shape heading into 2025. If natural gas prices remain elevated (above my forecast today) and the FEAR of "Drill Baby Drill" fades, I expect a lot of money to rotate into these profitable companies.

EQT Corp. (EQT) finished the year up 19.04%, with all of that coming in the last six weeks. EQT was actually down 7.86% YTD on 11/1/2024. The Company's production mix 94.2% natural gas, 5.4% NGLs and just 0.4% crude oil. All of their production is in Appalachia from the Marcellus and Utica Shales. It may have some temporary well freeze offs next week. Production should average 6.54 Bcfepd in 2025, up from 5.96 Bcfpd in 2024.

Coterra Energy (CTRA), the only other "Gasser", finished the year down 0.51%.

Crescent Energy (CRGY) up 13.53% in 2024 is just starting to get the attention it deserves. It is one of my Top Picks for 2025 thanks to its strong production growth (~34.5% YOY in 2024) and my forecast of 37.8% YOY production growth in 2025. 56% of Crescent Energy's production is natural gas and NGLs.

SM Energy (SM) up just 0.49% in 2024 is my other Top Pick for 2025 and it is one of Harry's Top Ten picks for 2025. See my 12/31 post about SM. < Harry van Neck, the Petroleum Economist, is going to join me on January 16th for a live webinar. He will be showing you his Top Ten picks for 2025. If you wish to attend this live event, you must register on the EPG website.

APA Corp. (APA) down 32.64%, Devon Energy (DVN) down 27.55% and Veren (VRN) down 25.97% should all bounce back big in 2025. They were profitable in 2024 and, based on my forecasts, they should increase Earnings Per Share in 2025. All three of them produce a lot of natural gas.

I will be moving Baytex Energy (BTE) and Vital Energy (VTLE) to our Small-Cap Growth Portfolio just because they have the lowest market-cap and I need to make room for Antero Resources (AR) and Range Resources (RRC), two large-cap "Gassers".

Baytex and Vital are both trading below book value and I see no justification for their low share prices. They were both profitable in 2024 and should generate higher earnings per share in 2025. My current valuations are $5.80US for BTE and $58.00US for VTLE.

All of my forecast/valuation models have been updated based on average prices for WTI oil of $75/bbl in 2025 and $80/bbl in 2026. For Henry Hub natural gas I am using $3.50/MMBtu in 2025 and $4.00/MMBtu in 2026. I do adjust for regional differentials and each company's hedges.

Just keep in mind that Permian Basin natural gas prices will continue to be much lower that other regions due to not enough pipeline takeaway capacity. The Matterhorn Express pipeline should help a bit. I do expect Canadian gas prices to improve in 2025 thanks to the very cold air moving deep into Central Canada and Eastern U.S. in January. Canada will soon be opening up its own LNG export facility on the West Coast, which should help de-bottleneck Western Canada.

All of my forecast models are macro driven Excel spreadsheets, so you can download them to your computer and change the commodity price assumptions at the bottom to see how they impact EPS, CFPS and stock valuations.