Sweet 16 Update - March 16

[dan_s]

All 16 stocks were up for the week. The Sweet 16 is now up 15.3% YTD compared to S&P 500 Index that is up 9.4% YTD.

I was very impressed by Bonanza Creek's Q4 results and their outlook for 2013. Production should be up over 60% in 2013. Heavily weighted to oil.

S-16 that will get the most bang from improving natural gas prices: CRZO, XEC, EOG, EXXI, HP, RRC, SM and UNT.

RRC has moved above my Fair Value, but I'm still using $3.50/mcf for gas in all of my models. I will take a hard look at RRC tomorrow. Unit Corp (UNT) looks like a Screaming Buy to me, assuming gas prices drift up to $4.00 (which I now believe they will). UNT is still trading 44% my Fair Value Estimate even if you assume gas averages $3.50/mcf all year. You should all read our profile on this one.

I need to update the ROSE forecast model to include the acquisition from CRK that was announced today.

After looking at the weather forecasts for the remainder of March, I now think we have a shot as NG storage dipping down to 1,700 bcf. That would be EXTREMELY BULLISH FOR GAS PRICES.

We will be publishing updated profiles on BCEI, CRZO and WLL next week.

I will be finishing up a profile on MMP this weekend. Magellan Midstream Partners (MMP) is one of the MLPs in our High Yield Income Portfolio. For high yield, PetroBakken, EPM-PA and GST-PA look very attractive to me.

On Saturday, I will post an updated Sweet 16 with all of my Fair Value Estimates updated. I will post an alert here.

[dan_s]

One of our top interns at SMU finished the profile update on Whiting Petroleum (WLL). We will publish it on Monday. The common stock continues to trade at a very low multiple of CFPS. I just don't see what justifies its discount to the other mid-cap Bakken companies. WLL is trading at less than 4X my 2013 CFPS estimate, which right in-line with what First Call is showing. They have rock solid double digit production growth locked in for several years. I have increased my Fair Value Estimate to $83.25/share. I have posted the updated Net Income & Cash Flow Forecast model under the Sweet 16 Tab.

[dan_s]

I have updated the Range Resources (RRC) forecast model and posted it to under the Sweet 16 Tab. I have increased my Fair Value Estimate to $85/share. If you think natural gas prices are going higher (I certainly do), then RRC is definitely worth taking a hard look at. It is the only true "gasser" in our Sweet 16.
RRC has an outstanding management team. If their new Mississippi Lime play in Oklahoma & Kansas starts ramping up, the share price will too. RRC is a very well respected company and they have the best acreage position in the Marcellus Shale, bar none.

[dan_s]

The updated Sweet 16 spreadsheet has been posted under the Sweet 16 Tab. All of my Fair Value Estimates and First Calls' adjusted price targets have been updated.

Tab 1 is a summary of the EPS and CFPS forecasts, Tab 2 shows our Fair Value Estimate compared to First Call's Price Target for each company as of 3-16-2013 (Excel).

Of note: First Call has increased their price target for CLR to over $100/share.

Here is something to keep in mind. It takes quite awhile for all of the analysts to update their forecast models and submit them to Reuters / First Call. Therefore, if you watch the weekly movement in the First Call price targets (which I do carefully) you can see how the analysts feel about the previous quarter's results and their outlook for a company. All of the Sweet 16 price targets have been drifting higher, especially GPOR and HP. XEC's target made a big move last week.