Earthstone Energy (ESTE) Valuation Update - June 6

[dan_s]

At the time of this post ESTE was trading at $20.42, up ~86% YTD.

I have updated my forecast/valuation for Earthstone using my new oil & gas price deck that I highlighted in my June 4th podcast.

My valuation increases by $2 to $38/share.
> Earthstone has approximately 60% of their oil and gas hedged for Q2, 2022.
> Unhedged volumes gradually increase each quarter and the volumes hedged with collars goes up in 2023.
> The Company's PV10 Net Asset Value today is at least $30/share just using P1 reserves and NYMEX strip prices.
> Q1 production was 35,509 Boepd and today it is approximately 74,000 Boepd because the BigHorn Acquisition closed on April 14th.
> Earthstone's guidance is for 2H 2022 production to average 78,000 Boepd. My forecast assumes an exit rate of 80,000 Boepd.
> Operating cash flow should go up from $104 million in Q1 to over $250 million in Q2.
> FCF should be over $520 million this year.

If actual results match my forecast, Earthstone's PV10 Net Asset Value of just P1 reserves should be over $40/share at year-end.

This is an Aggressive Growth company that has closed four very accretive acquisitions over the last 12 months.

[allen46]

Thanks for the update and the information on the hedges.