Carrizo Oil & Gas stays in Sweet 16 (for now)

[dan_s]

I just spent several hours going over EQT Corp's Q2 results and updating my forecast. Bottom line net income came in close to my forecast for Q2, but several line items were off. So....., I have decided to wait until the merger with Rice Energy is closed to move EQT into the Sweet 16. Carrizo Oil & Gas (CRZO) will stay in the Sweet 16. I was just going to move CRZO to our Small-Cap Growth Portfolio because I like it a lot.

I don't have a high level of confidence in my forecast model for EQT, but FWIW my valuation is $79.00/share. This compares to First Call's price target of $74.97, which should be going up since EQT's Q2 results beat First Call's estimates.

EQT is definitely a high quality "gasser".
After the merger it will be the largest producer of natural gas in the United States. AR + RRC combined have about the same amount of production. EQT's 2018 production s/b approximately 4 BCFE per day, which is ~5% of total U.S. natural gas production. Post merger, their production mix s/b 88% natural gas, 11% NGLs and just 1% crude oil.

At best my 2018 forecast is a "SWAG", but (without looking first) my operating cash flow per share forecast of $11.58 compares to First Call's CFPS estimate of $11.55.

A company with double digit production growth locked in for many years s/b trading at more than 8X operating cash flow per share.