Sweet 16 Update - April 10

[dan_s]

During the week ending April 8 the Sweet 16 gained 3.64% and is now up 51.61% YTD.
This compares to the S&P 500 Index that lost 1.21% during the week and is now down 5.83% YTD.

Our five gassers continue to lead the pack:
Antero Resources (AR) is up 89.37% YTD
Range Resources (RRC) is up 82.84% YTD
Comstock Resources (CRK) is up 81.58% YTD
EQT Corp. (EQT) is up 75.65% YTD and it is now over my valuation of $38.00.
Coterra Energy (CTRA) is up 51.32% YTD in 6th place behind Ovintiv (OVV), which is up 56.17% YTD.

EQT is the largest producer of natural gas by a wide margin and I will probably be raising my valuation soon after they release Q1 results and fresh guidance.

The companies trading at the deepest discount to my valuations are:
Earthstone Energy (ESTE) at $14.05, which compares to my valuation of $33.00. Earthstone is the smallest company in the Sweet 16, but it will soon close the BigHorn Acquisition that will push their production over 72,000 Boepd. Earthstone's Q4 2021 production was 30,244 Boepd.
Northern Oil & Gas (NOG) at $28.70, which compares to my valuation of 50.00. NOG is a non-op company that should be raising dividends quarter-after-quarter through at least 2023.
Callon Petroleum (CPE) at $61.96, which compares to my valuation of $106.00.

I think Comstock Resources (CRK)'s Q1 results and guidance will draw a lot of attention. Of our five gassers, it trades at the deepest discount to my valuation of $22.00.

I will be adjusting the oil, gas and NGL prices used in my forecast/valuation models in May. Today, the oil prices that I am using for Q2 to Q4 2021 look a bit too high, but the natural gas and NGL prices in my models are probably way too low. All of my models do adjust for regional commodity price differentials and each company's hedges. As of today, all of my valuation look too low.

The Sweet 16 still has a lot of upside.
> Trading at a PE ratio of 6.53 based on my 2022 forecasts. < Most of the S&P 500 Index companies still trade at PE ratios over 20.
> Trading at an average of 3.57 X operating cash flow per share. < This is an insane discount for companies of this quality.

The Sweet 16 Summary Spreadsheet has been updated and will be posted to the EPG Home Page this afternoon. It has a lot of information that can help you understand the size and potential upside of each company. I urge all of you to take 30 minutes to study it carefully.

[charlie1]

Dan,
The average gain for the Sweet 16 stocks this year is 51.7%. Only EQT is trading above your fair value. ESTE has the most upside by a wide margin. Comstock has done great in the last few weeks ,but its fair value is $22 not $32. At $22 it still has 50% upside w

[dan_s]

Thanks for catching my typo on CRK's valuation, I have fixed it in the post above.

If the "new normal" for natural gas prices is $6/MMBtu, all of the gasser valuations are going a lot higher.