Sweet 16 Update - August 21
Posted: Sat Aug 21, 2021 3:47 pm
This has never happened in the 15 history of the Sweet 16!
> The First Call price targets for all 16 companies were increased during the week as Reuters finally updated their database for new analysts' price targets submitted since Q2 results and fresh guidance came out. And...
> The share prices for all 16 companies went down during the week ending August 20.
The Sweet 16 lost 15.06% during the week ending August 20 and is now up 59.37% YTD. The S&P 500 Index lost 0.7% during the week and is now up 18.25% YTD. FEAR of the Covid Delta Variant is driving the decline in oil prices and natural gas prices have only pulled back slightly during the week because natural gas demand is not impacted by Covid travel restrictions and US supply/demand remains very tight.
From Trading Economics:
Oil Price: "WTI crude futures settled 2.2% lower at a 3-month low of $62.32 a barrel on Friday, extending losses for the 7th straight day and stretching the week’s decline to 8.9%. It was the longest losing streak since 2019 and the biggest week of losses in more than nine months as the ongoing spread of the Delta strain of COVID-19 and weak economic data raised concerns the global economic recovery might be diminished as several countries re-introduced travel restrictions and limit air traffic."
Natural Gas Price: "US natural gas futures traded higher at $3.9 per million British thermal units, remaining close to a recent four-week low of $3.8 as weather forecasts turned milder than before, potentially dimming demand for the fuel used to cool homes and businesses. Natural gas futures have been supported by strong demand for US exports of liquified natural gas as global gas continues to trade above US prices. Natural gas prices in Asia and Europe are hovering in the $15 to $17 per MMBtu range. Elsewhere, the Energy Information Administration said utilities added 42 bcf into storage last week, above market expectations of 31 bcf, but natural gas in US storage is now 174 Bcf below the 5-year average for this time of year."
Thru 8/20 WTI has averagd only a few dollars below $70/bbl for the quarter, which is the price used in my forecast/valuation models. Natural gas prices and NGL prices are higher than what I've used in the models. The offsets should have revenues through August 20 very close to my models.
We have published updated profiles for AR, CRK, CLR, DVN, EQT, OVV, PDCE, PXD and RRC. CPE, XEC, EOG, LPI and TALO are sitting here for my review and I plan to finish them all next week. ESTE and FANG are still being worked on.
All of the forecast models for the companies in our Small-Cap Growth Portfolio (GDP, HMENF, IPOOF, MTDR, MGY, NOG, PVAC, REI, SBOW and SOI) have been updated and posted to the EPG website.
All 26 companies will report solid Q3 results and free cash flow from operations. Higher natural gas and NGL prices are offsetting lower oil prices for most of them.
None of Continental Resources (CLR) oil is hedged after May, 2021 so I am going to show you during my Sunday podcast how little the recent pullback in the price of oil impacts my forecast and valuation. The primary reason is that CLR now produces over a Bcfe per day of natural gas and NGLs. My current valuation of CLR is $59/share and even if I assume that their realized oil price averages $60/bbl for all future periods, my valuation only drops to $55/share.
Until WTI finds a support level, the "gassers" look like the much better short-term picks: AR, CRK EQT, RRC and XEC
> The First Call price targets for all 16 companies were increased during the week as Reuters finally updated their database for new analysts' price targets submitted since Q2 results and fresh guidance came out. And...
> The share prices for all 16 companies went down during the week ending August 20.
The Sweet 16 lost 15.06% during the week ending August 20 and is now up 59.37% YTD. The S&P 500 Index lost 0.7% during the week and is now up 18.25% YTD. FEAR of the Covid Delta Variant is driving the decline in oil prices and natural gas prices have only pulled back slightly during the week because natural gas demand is not impacted by Covid travel restrictions and US supply/demand remains very tight.
From Trading Economics:
Oil Price: "WTI crude futures settled 2.2% lower at a 3-month low of $62.32 a barrel on Friday, extending losses for the 7th straight day and stretching the week’s decline to 8.9%. It was the longest losing streak since 2019 and the biggest week of losses in more than nine months as the ongoing spread of the Delta strain of COVID-19 and weak economic data raised concerns the global economic recovery might be diminished as several countries re-introduced travel restrictions and limit air traffic."
Natural Gas Price: "US natural gas futures traded higher at $3.9 per million British thermal units, remaining close to a recent four-week low of $3.8 as weather forecasts turned milder than before, potentially dimming demand for the fuel used to cool homes and businesses. Natural gas futures have been supported by strong demand for US exports of liquified natural gas as global gas continues to trade above US prices. Natural gas prices in Asia and Europe are hovering in the $15 to $17 per MMBtu range. Elsewhere, the Energy Information Administration said utilities added 42 bcf into storage last week, above market expectations of 31 bcf, but natural gas in US storage is now 174 Bcf below the 5-year average for this time of year."
Thru 8/20 WTI has averagd only a few dollars below $70/bbl for the quarter, which is the price used in my forecast/valuation models. Natural gas prices and NGL prices are higher than what I've used in the models. The offsets should have revenues through August 20 very close to my models.
We have published updated profiles for AR, CRK, CLR, DVN, EQT, OVV, PDCE, PXD and RRC. CPE, XEC, EOG, LPI and TALO are sitting here for my review and I plan to finish them all next week. ESTE and FANG are still being worked on.
All of the forecast models for the companies in our Small-Cap Growth Portfolio (GDP, HMENF, IPOOF, MTDR, MGY, NOG, PVAC, REI, SBOW and SOI) have been updated and posted to the EPG website.
All 26 companies will report solid Q3 results and free cash flow from operations. Higher natural gas and NGL prices are offsetting lower oil prices for most of them.
None of Continental Resources (CLR) oil is hedged after May, 2021 so I am going to show you during my Sunday podcast how little the recent pullback in the price of oil impacts my forecast and valuation. The primary reason is that CLR now produces over a Bcfe per day of natural gas and NGLs. My current valuation of CLR is $59/share and even if I assume that their realized oil price averages $60/bbl for all future periods, my valuation only drops to $55/share.
Until WTI finds a support level, the "gassers" look like the much better short-term picks: AR, CRK EQT, RRC and XEC