Sweet 16 Update - October 14

[dan_s]

Another sideways week for the Sweet 16. Until they release Q3 results or there is a big move in commodity prices, I expect them all to flop around close to where they are this coming week.

Concho Resources (CXO) and Diamondback Energy (FANG) are the only two stocks up YTD. The portfolio is down 23.27% YTD (down 0.22% for the week). Rather hard to believe since all 16 companies are in much better shape today than they were a year ago. If oil prices move just a bit higher and Q3 results are OK, we should see some sector rotation in November. Fund managers know the energy sector is oversold, but they want confirmations that oil prices are not going to dip again.

FANG and Pioneer Natural Resources (PXD) both announced Q3 production that was above what I had in my forecast models, so I have updated my forecast models for both companies. You can view them on the EPG website. My valuation of PXD moves up $4 to $194/share. PXD also announced realized NGL prices that were higher than I had in my model. This may explain why SM Energy (SM) stock moved up. Stansberry Research published a report on the "Oil Super Cycle" and their top pick is PXD; calling it The Next Exxon.

I am expecting Carrizo Oil & Gas (CRZO) to announce a buyer for their DJ Basin package when they announce Q3 results on November 7. I think they will get a much better price than what the market is expecting.

I am using $50.00 WTI and $3.00 Henry Hub gas for my 2018 forecasts / valuations. I expect commodity prices to be higher than that.

Range Resources (RRC) will be the first Sweet 16 company to announce Q3 results. They will announce on October 24.

The weather in the eastern half of the U.S. is now expected to turn much colder by the end of October. The three previous La Ninas have produced cold Novembers. That would help all of the gassers.

You can view my valuations and First Call's price targets for each Sweet 16 stock on the Sweet 16 spreadsheet (Tab 2).