Energy Prospectus

Here is a list of the Sweet 16 companies that pay a dividend with their annual yield shown based on the Nov 13 closing price. Dividend shown is 4X the most recent quarterly dividend.

CXO $0.72 for 1.62% < Recently dropped from the Sweet 16 because it is merging with COP, that pays an annual dividend of $1.72 for 4.88% yield.
XEC $0.84 for 2.87%
DVN $0.40 for 3.95% < I expect the dividend to go much higher (maybe double) after the merger with WPX closes in Q1 2021
EOG $1.32 for 3.70%
FANG $1.31 for 4.57%
OVV $0.38 for 3.44%
PE $0.18 for $1.86% < PE will merge with PXD early in 2021
PXD $2.09 for $2.43%

All of the Sweet 16 forecast/valuation models have been updated for Q3 results and fresh guidance from each company. You can view them on the EPG Website (under the Sweet 16 tab) or download them to Excel so you can play with the production and commodity prices used in each model. My forecast models are macro-driven Excel spreadsheets and meant to be tools for you during your due diligence process.
> My 2021 forecasts are based on average prices of $50/bbl for WTI oil and $3.00/mcf for HH natural gas.
> I adjust each forecast periods "realized commodity prices" for hedges and regional differentials.
> Hedges are shown at the bottom of each forecast model.
> Q3 NGL prices came in much higher than my Q3 forecasts and I do expect that trend to continue.

The Sweet 16 has increased 34.8% since October 31st with ~4% of the increase the result of my decision to add AR as a replacement for CXO, which is merging with COP.

Since Good Friday, April 10 (which I tag as the bottom for this oil price cycle) the Sweet 16 is up 57.69%. The S&P 500 Index is up 28.51% since April 10.

As a group, the Sweet 16 is trading at a 76.86% discount to my updated valuations. My fresh valuation and First Call's price targets as of November 14 for each company can be found under Tab 2 of the main Sweet 16 spreadsheet. It will be posted to the EPG website late today. Just remember that the First Call price targets are just the average of all price targets submitted to Reuters. It takes over a month for them all to be updated in the Reuters data base and some are over six months old. I use TipRanks to find the most current updates from other analysts and I show them in the lower right of each forecast model.

Parsley Energy (PE) is merging with Pioneer Natural Resources (PXD), so I will be replacing PE, but I have not selected a replacement yet.

We have updated the profiles for CRK and EQT for Q3 results. Updated profiles for XEC, CLR, PDCE and PXD will be published next week and all of them will be updated by the end of November.

Size does matter in this business, so our "Elite Eight" (XEC, CLR, DVN, EQT, EOG, FANG, PXD and RRC) are the safest bets. These should be "Core Holdings" in any energy sector portfolio.

Natural gas and NGL prices are expected to go much higher this winter. For near-term upside I like AR, CRK, EQT, RRC, XEC, DVN and OVV because they produce a lot of gas and NGLs.

For more details on each company, see my previous posts under this tab.

WTI crude futures fell for a second session by 2.4% to settle at $40.13 per barrel on Friday, amid mounting worries about near term fuel demand, rising supply in Libya and a surprise build in US crude stockpiles. Coronavirus cases in the US rose by a record for a third consecutive day and major cities like Chicago and New York City are imposing tougher restrictions to curb the spread of the disease. On the supply front, Libyan oil production rose to 1.215 million bpd, up from the 1.04 million bpd reported on November 7th, according to Reuters. Still, WTI crude rose around 8.1% on the week, the second straight weekly gain, lifted by prospects of a coronavirus treatment after Pfizer/BioNTech announced that its experimental vaccine was more than 90% effective and hopes that OPEC+ will delay a planned easing of production cuts from the start of next year.

MY TAKE: WTI is back within the $38.50 to $41.50 trading range that held up for almost three months. Strong resistance at $41.50 much be taken out before WTI can move to mid-$40, which I don't expect to happen until mid-Q1. Roll out of the vaccine is key to getting WTI back over $50/bbl. Low oil price is actually bullish for natural gas and NGLs since it will keep a lid on associated gas production.