During the week ending March 15th the Sweet 16 moved 5.9% higher, primarily because of higher oil prices. WTI closed slightly lower at $58.39/bbl on Friday, but the close over $58.00 was important because several earlier attempts to break through that resistance level had been turned back. OPEC statements that they will pump oil full out if "NOPEC" law passes are causing some worry, but with U.S. and OECD oil inventories falling there is near-term pressure for higher oil prices. April is when we should see a steady decline in crude oil inventories.
Leading the pack are PDC Energy (up 35.69% YTD) and Southwestern Energy (up 26.69% YTD).
The only two that are down YTD are Antero Resources (down 10.33% YTD) and Centennial Resources (down 16.70% YTD). First Call's target prices are $13.57 for AR and $15.63 for CDEV.
All of the Sweet 16 company profiles and forecast models at up-to-date on the EPG website.
I have added a new column to the Sweet 16 spreadsheet that shows the PV10 value of each companies' proven reserves (P1).
An upstream company's breakup value is approximately (Current Assets + PV10 of P1 - Total Debt)/common stock outstanding. Include preferred stock in total debt to this "back of the envelop" simple computation.
The updated Sweet 16 Spreadsheet is updated each Sunday on the EPG website.
Sweet 16 Update - March 16
Sweet 16 Update - March 16
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Sweet 16 Update - March 16
Barron's had round table of oil analysts this weekend.
Analyst David Heikkinen's Picks, liked the Permian specifically:
"We see some of the best value in companies with Permian potential. Multiples of many companies in the Midland basin [a section of the Permian] have been compressed. We rate Pioneer Natural Resources [PXD] and Diamondback Energy [FANG] favorably, followed by Parsley Energy [PE], in that order. Each has reset growth expectations and that lowered estimates. They are now en route to a widespread string of estimate beats and raises, and better price realizations in 2020 as Permian pipelines come online and production ramps. Pioneer has the deepest inventory, driving a net asset value of $200 a share. It trades for less than seven times 2020 estimated EV/Ebitda. Parsley trades for 5.4 times, and Diamondback, for 5.2 times. All are on our focus list.
Encana [ECA] also offers an attractive valuation, free cash to buy back shares, and growth potential. It recently bought Newfield Exploration, a big operator in Oklahoma, but the market hates the deal as Newfield’s primary assets are in the out-of-favor Stack/Scoop play. The stock has sold off, leaving the company’s Texas assets trading at a big discount to peers. Encana has a headwind, as attractive 2019 oil-price hedges are rolling off into 2020."
Look for those names to do well on Monday.
Analyst David Heikkinen's Picks, liked the Permian specifically:
"We see some of the best value in companies with Permian potential. Multiples of many companies in the Midland basin [a section of the Permian] have been compressed. We rate Pioneer Natural Resources [PXD] and Diamondback Energy [FANG] favorably, followed by Parsley Energy [PE], in that order. Each has reset growth expectations and that lowered estimates. They are now en route to a widespread string of estimate beats and raises, and better price realizations in 2020 as Permian pipelines come online and production ramps. Pioneer has the deepest inventory, driving a net asset value of $200 a share. It trades for less than seven times 2020 estimated EV/Ebitda. Parsley trades for 5.4 times, and Diamondback, for 5.2 times. All are on our focus list.
Encana [ECA] also offers an attractive valuation, free cash to buy back shares, and growth potential. It recently bought Newfield Exploration, a big operator in Oklahoma, but the market hates the deal as Newfield’s primary assets are in the out-of-favor Stack/Scoop play. The stock has sold off, leaving the company’s Texas assets trading at a big discount to peers. Encana has a headwind, as attractive 2019 oil-price hedges are rolling off into 2020."
Look for those names to do well on Monday.
Re: Sweet 16 Update - March 16
My To Do List contains a hard look at EnCana, which will probably be added to the Sweet 16 in Q2.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group