Sweet 16 Update - May 23

dan_s · Post by **dan_s** » Sat May 23, 2020 10:08 am

EQT Corp. (EQT) has been added to the Sweet 16. It replaces Oasis Petroleum (OAS). Oasis is going to be under pressure to make it through this summer, but they should make it if their bankers cut them some slack. Oasis Midstream (OMP) should be fine. See my post about OMP under the "Picks and Tips" tab.

Since April 10 (IMO the peak of COVID-19 Gloom & Doom) the Sweet 16 is up 45.87%. These stocks were grossly oversold, so they still have a lot more upside for us as oil, gas and NGL prices will continue to ramp up as we move get back to work. This world still needs a lot of energy and most of it will come from hydrocarbons.

Matador Resources (MTDR) leads the pack, up 161.06%. It passed my valuation in the last newsletter and I have raised my valuation to $10.00.
OVV is up 90.16%
TALO is up 82.89%
RRC is up 60.27%

EQT is a large-cap "gasser" that is similar to RRC, but with more than twice the amount of natural gas production (over 4 Bcfpd in Q1).
~95% of EQT's production is natural gas.
I've been following EQT for over five years and if I'm right about natural gas prices, EQT is going to report some very impressive number in 2021.
My initial valuation is $22.00 per share. It closed at $13.74 on May 22.
I wanted to add more exposure to natural gas and NGLs because I believe the North American gas market will be extremely tight by the end of this year.
~87% of EQT's gas for Q2 to Q4 2020 is hedged at an average price of $2.71, so they have over $1.5 billion of cash flow from operations locked in for this year.
They reported Q1 operating cash flow of $512.6 million, so my forecast might prove to be way too low.
We will be publishing an updated profile on EQT next week.

I still have four more profiles to update: CLR, PE, PDCE and TALO.

I will post my podcast to the EPG website late today and I will finish the newsletter on Sunday & Monday. Yes, I do work on holidays.

Enjoy the Memorial Day weekend. It is a good time to reflect on the millions of men & women who fought to protect our Liberty that is under a lot of pressure these days.