Earthstone Energy (ESTE) Update - May 12

[dan_s]

I have updated my forecast model for ESTE and posted it to the EPG website.

This is a pure play on the Permian Basin.

My valuation increases by $0.75/share to $18.25, which compares to First Call's price target of $15.18. NONE of the analysts that cover ESTE have submitted new forecast/valuations to Reuters since the company released Q1 results and those that are out there are based on much lower oil prices than we have today. Therefore, the First Call price target should be drifting up to my valuation when the Wall Street Gang catches up.

Earthstone's Q1 production (9,664 Boepd) came in below my forecast, but higher realized oil prices pushed revenues slightly higher than my forecast. The Company is holding to their production guidance of 12,000 to 12,500 Boepd (64% crude oil) for this year. To achieve that goal, they need to increase production more than 55% YOY. They have more than enough cash flow from operations and liquidity to fund their aggressive drilling program.

ESTE closed at $9.19 on May 11. It is trading at a MUCH LOWER MULTIPLE OF OPERATING CASH FLOW PER SHARE than all of the other Permian Basin companies that I follow. It is definitely a small-cap that deserves more attention.

[wilmawatts]

Management here is excellent