Sweet 16 Update - March 8

[dan_s]

It has been a crazy week around here with the two luncheons and with the interns completing drafts of company profiles right and left. I need another me to keep up.

I just updated the Sweet 16 spreadsheet and posted it to the website.
> Bonanza Creek Energy (BCEI) has been promoted to the S-16, replacing Swift Energy (SFY). I still like SFY a lot. I just moved it to our Small-Cap Growth Portfolio. I moved Swift's profile to the Watch List Tab.
> The Sweet 16 is now up 12.5% YTD but it is still trading 37% below my estimated Fair Values
> All 16 reported strong production and reserve growth
> First quarter results should be very impressive since oil & gas prices have improved.

Range Resources (RRC) is approaching my Fair Value Estimate, but that's because I am still assuming $3.50/mcf for Henry Hub gas all year. RRC is our loan "gasser" with 75% of their production NG. I am now much more bullish on gas. Mother Nature has helped out with several late winter storms that have pushed down NG storage to a level which I now believe will support $4.00/mcf. I will stay with $3.50 in my forecast models until I see where storage is by the end of March. If storage falls below 1,900 bcf it will be very bullish for the gassers. I also think storage will fill much slower than it did last summer. Regardless, RRC is a great company and it definitely deserves to trade at a high multiple. RRC recently announced that they estimate over a billion bbls of recoverable oil in their Mississippi Lime acreage in Oklahoma & Kansas.

If gas does move over $4/mcf these Sweet-16 companies will benefit the most: CRZO, EOG, EXXI, RRC, SM and UNT

Energy XXI (EXXI) is the only stock down YTD. Wall Street is in love with the major shale plays, therefore EXXI gets little attention. Plus, I think offshore frightens away a lot of investors. I'm expecting EXXI to report strong production growth over the next two quarters, going from 44,575 boepd in fiscal Q2 to 55,500 boepd in fiscal Q4 (quarter ending 6/30/2013). EXXI has very strong cash flow and a solid balance sheet. Trading at less than 4X CFPS, it looks very attractive to me at today's share price.

I will finish updating the profiles on CRZO, GPOR, WLL and BCEI next week. I have to write my newsletter first.

Thanks for your support. We moved over 400 EPG members this week!

PS: Magnum Hunter called yesterday. They will be hosting a luncheons for us in May.