Sweet 16 Update - Sept 23

[dan_s]

For the week ending Friday, September 21 the Sweet 16 gained 3.62%. It was one of the best weekly gains all year, but the portfolio is still down 0.08% YTD.

Cimarex Energy (XEC) is the biggest looser, down 24.32% YTD. If I take it out, the Sweet 15 would be up 1.5% YTD. What's weird is that XEC is having a decent year, on-track for full-year earnings per share of $6.50 to $7.00, which compares to $5.28 actual EPS for 2017. Operating cash flow per share is also very strong, on-track for ~$15 CFPS. It does have lots of exposure to the big Permian Basins oil price differential, but that is offset a bit by growing production in the Mid-Continent (SCOOP/STACK).

Continental Resources (CLR) leads the pack, up 17.5% YTD. It has no exposure to the Permian Basin and all of CLR's oil is unhedged. Plus, it is generating a lot of free cash flow from operations.

Centennial Resources Development (CDEV) and Earthstone Energy (ESTE) are the newest members of the Sweet 16 (added in May). They are up 5.8% and 11.3% YTD respectively. They are both prime takeover targets.

Gulfport Energy (GPOR) trades at the largest discount to my valuation. It should get some "love" from the Wall Street Gang as they come around to the awareness of how tight the U.S. gas market really is. Range Resources (RRC) is the "safe bet" amoung the three gassers.

PDC Energy (PDCE) will be dropped from the Sweet 16 if Colorado voters are dumb enough to pass Proposition 112, which will shut down most of the drilling in the state.

I will have more details on the Sweet 16 in Tuesday's newsletter.