Sweet 16 Update - April 22

[dan_s]

I have gone over each individual company forecast/valuation model for the companies in our Sweet 16 Growth Portfolio.
> I have lowered my oil price assumptions and I have raised my 2H natural gas price assumptions. I've also lowered my NGL price assumptions.
> I have lowered the production forecasts for each company to the low end of their guidance or 10% below it for most of the oil production.
> I have compared my forecasts for revenue, net income and operating cash flow for each company to what First Call now shows and I've made sure my forecasts were lower.

You can view each forecast model on the EPG website and you can download them to Excel on your computer. Then you can change the production and commodity price assumptions to see how it impacts each company's valuations.

First quarter results should be good and second quarter results should be the low point for the year.

All 16 companies are generating solid cash flow from operations.

CLR and SOI have the most exposure to the sharp decline in oil prices. Both companies have strong balance sheets and they should survive.

EOG and PXD are the only two companies with market-caps above their book value. Only in "Crazy Coronavirus World" do companies of this quality trade below book value.

I've also updated the main Sweet 16 spreadsheet so you can see my valuations for each company and how they compare to First Call's current price targets (on tab 2). On the far right side on Tab 1 you can find the date that each company is expected to release Q1 results. CXO, CLR, MTDR and RRC are expected to announce Q1 results on April 30.

IMO the most important stat is operating cash flow per share, which can be found on the right side of Tab 1 on the main spreadsheet or at the bottom of each individual company forecast.

Keep in mind that Q1 results are going to include some big numbers for non-cash impairment and mark-to-market adjustments on hedges. Ignore them and focus on production and operating cash flow. Solid cash flow is KEY TO SURVIVAL IN 2020.

During the next two days, I will review and update each forecast model for the companies in our Small-Cap Growth Portfolio.