Sweet 16 Update - Mar 15
Posted: Sun Mar 15, 2020 10:34 am
We will be publishing a newsletter on March 17, so I will limit this.
All of the Sweet 16 forecast/valuation models will be updated on the EPG website today. Most of them have already been updated. OVV, PE, PXD and PDCE updated models will be posted this afternoon. The other 12 are already updated on the website.
The Sweet 16 closed on March 13th at a 291% discount to the First Call price targets. All of them are now trading below book value, which is really crazy since all of them have recently published audited financial statements.
The companies with lots of their oil hedged are the safest bets. CLR is the only one that does not have any of their oil hedged.
At the bottom far right on each forecast model spreadsheet is a list of the most recent analysts' reports and their price target. In most cases they are very close to my valuations.
CPE and PDCE are both trading at less than 1X my 2020 forecast of operating cash flow per share. They both recently closed big mergers, which adds to the uncertainty. However, since the companies they merged with (Carrizo and SRC Energy) are companies that I followed closely, it was easy for me to build a proforma forecast model for each of them. Plus, they both have provided detailed guidance for 2020. They both have more than 50% of their 2020 oil hedged at very good prices, so they are insulated this year from the recent oil price decline.
As I pointed out in my March 14 podcast, I am assuming that the price of oil will bottom (WTI average of $30) in the 2nd quarter and then ramp back up to $50 by year-end. IMO if oil stays in the $30s for long we will see a steep decline in oil supply, shortages in 2021, and a big spike in the oil price next year. Of course this assumes that the COVID-19 "Angel of Death" does not kill most of us.
All of the Sweet 16 forecast/valuation models will be updated on the EPG website today. Most of them have already been updated. OVV, PE, PXD and PDCE updated models will be posted this afternoon. The other 12 are already updated on the website.
The Sweet 16 closed on March 13th at a 291% discount to the First Call price targets. All of them are now trading below book value, which is really crazy since all of them have recently published audited financial statements.
The companies with lots of their oil hedged are the safest bets. CLR is the only one that does not have any of their oil hedged.
At the bottom far right on each forecast model spreadsheet is a list of the most recent analysts' reports and their price target. In most cases they are very close to my valuations.
CPE and PDCE are both trading at less than 1X my 2020 forecast of operating cash flow per share. They both recently closed big mergers, which adds to the uncertainty. However, since the companies they merged with (Carrizo and SRC Energy) are companies that I followed closely, it was easy for me to build a proforma forecast model for each of them. Plus, they both have provided detailed guidance for 2020. They both have more than 50% of their 2020 oil hedged at very good prices, so they are insulated this year from the recent oil price decline.
As I pointed out in my March 14 podcast, I am assuming that the price of oil will bottom (WTI average of $30) in the 2nd quarter and then ramp back up to $50 by year-end. IMO if oil stays in the $30s for long we will see a steep decline in oil supply, shortages in 2021, and a big spike in the oil price next year. Of course this assumes that the COVID-19 "Angel of Death" does not kill most of us.