Sweet 16 Update - Sept 8
Posted: Sat Sep 08, 2018 10:01 am
The Sweet 16 declined 5.54% during the week ending September 7, 2018.
Why...
> Crude oil prices ran up the week before on Hurricane Gordon fears of GOM and Gulf Coast shut-in. When Gordon stayed east of the primary producing areas, the price of oil pulled back, which caused speculators who purchased shares the week before to hit the "Sell Button".
> "Trump's Tariff War" with China has injected new uncertainty over demand for oil. The U.S. and the global economy are doing fine and this "stuff" will get worked out.
> The general notion that Wall Street believes upstream companies cannot make money at today's oil, gas and NGL prices. This one is total hogwash. All of the Sweet 16 are profitable and they are growing production and increasing the value of their leasehold by converting it to HBP.
> "Permi Fear", a new term for the FEAR of the Permian Basin takeaway capacity issue getting a lot worse and lasting a lot longer. It is a valid concern, but it is a short-term problem and IMO is being blown out of proportion. Plus, it has slowed U.S. oil production growth, which will just make an already tight global oil market even tighter.
> Fear that Trump will back down from the sanctions against Iran. IMO I think Trump is going for "Regime Change" in Iran and it will take a lot more oil off the market. If you watched the video that I posted here on Thursday, you know that I'm not the only one that thinks Iran is in big trouble.
I have updated the Sweet 16 main spreadsheet and posted it to the EPG website. My only change is that I raised the valuation of Callon Petroleum (CPE) based on their updated guidance. All of my valuations are based on commodity prices in the future that are lower than they are today. I assume $65/bbl WTI in all future periods.
First Call's price targets stayed the same or drifted slightly higher for all 16 companies. The Sweet 16 is now trading 70.5% below my valuation of the group and 44.4% below First Call's price target. First Call's price targets are still based on a lot of old analysts reports, so I expect them to keep drifting higher.
Cimarex Energy (XEC) was the only S-16 stock up on the week, but it remains grossly oversold.
Unless you think the price of oil is going a lot lower, now is a great time to add some of our "Elite Eight" as core holdings.
PS: This morning one of our members sent me an article about the South Texas Eagle Ford, where oil is selling at a premium to WTI. It has good stuff in it about Lonestar Resources (LONE) and about increasing demand for frac sand. Those of you that own HCLP should read it. If you want a copy, send me an email: dmsteffens@comcast.net
Why...
> Crude oil prices ran up the week before on Hurricane Gordon fears of GOM and Gulf Coast shut-in. When Gordon stayed east of the primary producing areas, the price of oil pulled back, which caused speculators who purchased shares the week before to hit the "Sell Button".
> "Trump's Tariff War" with China has injected new uncertainty over demand for oil. The U.S. and the global economy are doing fine and this "stuff" will get worked out.
> The general notion that Wall Street believes upstream companies cannot make money at today's oil, gas and NGL prices. This one is total hogwash. All of the Sweet 16 are profitable and they are growing production and increasing the value of their leasehold by converting it to HBP.
> "Permi Fear", a new term for the FEAR of the Permian Basin takeaway capacity issue getting a lot worse and lasting a lot longer. It is a valid concern, but it is a short-term problem and IMO is being blown out of proportion. Plus, it has slowed U.S. oil production growth, which will just make an already tight global oil market even tighter.
> Fear that Trump will back down from the sanctions against Iran. IMO I think Trump is going for "Regime Change" in Iran and it will take a lot more oil off the market. If you watched the video that I posted here on Thursday, you know that I'm not the only one that thinks Iran is in big trouble.
I have updated the Sweet 16 main spreadsheet and posted it to the EPG website. My only change is that I raised the valuation of Callon Petroleum (CPE) based on their updated guidance. All of my valuations are based on commodity prices in the future that are lower than they are today. I assume $65/bbl WTI in all future periods.
First Call's price targets stayed the same or drifted slightly higher for all 16 companies. The Sweet 16 is now trading 70.5% below my valuation of the group and 44.4% below First Call's price target. First Call's price targets are still based on a lot of old analysts reports, so I expect them to keep drifting higher.
Cimarex Energy (XEC) was the only S-16 stock up on the week, but it remains grossly oversold.
Unless you think the price of oil is going a lot lower, now is a great time to add some of our "Elite Eight" as core holdings.
PS: This morning one of our members sent me an article about the South Texas Eagle Ford, where oil is selling at a premium to WTI. It has good stuff in it about Lonestar Resources (LONE) and about increasing demand for frac sand. Those of you that own HCLP should read it. If you want a copy, send me an email: dmsteffens@comcast.net