Sweet 16 Update - Oct 31
Posted: Sun Oct 31, 2021 10:37 am
The Sweet 16 lost 5.09% during the week ending October 29 and is now up 155.45% YTD. The S&P 500 Index gained 1.61% and is now up 22.61%. It has been a very good year for stocks.
During the week First Call's price targets for 15 of the 16 moved higher, with TALO being the only one down slightly ($0.06 to $18.38). I increased my valuations for AR and RRC, but lowered my valuation of EQT. EQT recently closed a very large acquisition and I need to spend more time on it to see if it deserves to trade at a higher multiple of operating CFPS. EQT closed at $19.91, which compares to my updated valuation of $36.00.
Comstock Resources (CRK) is up 125.86% YTD, but it still trades at less than half of my valuation. Comstock is a pure play on the Haynesville Shale with 98% of their production being natural gas and NGLs. They recently sold their Bakken assets to Northern Oil & Gas (NOG) for $154 million, so Comstock's 2022 production will be 99.5% natural gas and NGLs next year.
CRK's share price ($9.87) is less than 2.3 X my 2021 operating cash flow per share forecast ($4.30), which is extremely low for a company with this much running room. If HH natural gas averages $4.25/MMBtu next year, Comstock's operating cash flow should be over $1.5 Billion ($6.50/share), which makes my current valuation of $24.00/share look too conservative. The last time I looked ~58% of Comstock's 2022 production was unhedged. I to expect them to hedge more with collars as they like to have 50% to 60% of their next twelve month's production hedged.
Comstock will be announcing Q3 results and fresh guidance on Tuesday, November 2. This one deserves more Wall Street "love".
Talos Energy (TALO) is up 57.4% YTD, but still trades at less than half of my valuation. Production was down in Q3 thanks to Hurricane Ida, but it will surge back in Q4.
I will be driving up to Dallas on Tuesday because Miss Susan needs some free dental work from our son, Dr. Clark and we need to get some sugar from the grandkids (Drake and Wilson). I will be checking the Q3 results and posting some comments here, but I won't be updating my valuations until I get back to Houston Thursday afternoon. I plan to have all of the Sweet 16 forecast/valuation models updated by November 8.
My updated valuations will give equal weight to 2021 and 2022 operating cash flow, so they should all be going up.
During the week First Call's price targets for 15 of the 16 moved higher, with TALO being the only one down slightly ($0.06 to $18.38). I increased my valuations for AR and RRC, but lowered my valuation of EQT. EQT recently closed a very large acquisition and I need to spend more time on it to see if it deserves to trade at a higher multiple of operating CFPS. EQT closed at $19.91, which compares to my updated valuation of $36.00.
Comstock Resources (CRK) is up 125.86% YTD, but it still trades at less than half of my valuation. Comstock is a pure play on the Haynesville Shale with 98% of their production being natural gas and NGLs. They recently sold their Bakken assets to Northern Oil & Gas (NOG) for $154 million, so Comstock's 2022 production will be 99.5% natural gas and NGLs next year.
CRK's share price ($9.87) is less than 2.3 X my 2021 operating cash flow per share forecast ($4.30), which is extremely low for a company with this much running room. If HH natural gas averages $4.25/MMBtu next year, Comstock's operating cash flow should be over $1.5 Billion ($6.50/share), which makes my current valuation of $24.00/share look too conservative. The last time I looked ~58% of Comstock's 2022 production was unhedged. I to expect them to hedge more with collars as they like to have 50% to 60% of their next twelve month's production hedged.
Comstock will be announcing Q3 results and fresh guidance on Tuesday, November 2. This one deserves more Wall Street "love".
Talos Energy (TALO) is up 57.4% YTD, but still trades at less than half of my valuation. Production was down in Q3 thanks to Hurricane Ida, but it will surge back in Q4.
I will be driving up to Dallas on Tuesday because Miss Susan needs some free dental work from our son, Dr. Clark and we need to get some sugar from the grandkids (Drake and Wilson). I will be checking the Q3 results and posting some comments here, but I won't be updating my valuations until I get back to Houston Thursday afternoon. I plan to have all of the Sweet 16 forecast/valuation models updated by November 8.
My updated valuations will give equal weight to 2021 and 2022 operating cash flow, so they should all be going up.