Energy Prospectus

I'm looking at call options for some of the Sweet 16 and wanted to ask if Dan/forum could give thoughts on timeframes for significant movement - say above 50% gains from today.

In reviewing my notes, there are a number of factors that have been discussed here in forum, in Dan's podcasts and VFH papers, and in articles from other good analysts:
Quarterly reports
Acquisitions
Tax policies
PV10 changes
Hedges rolling off
Transition from summer A/C to shoulder season to winter onset
Price spikes in Q1 23

A lot of the S16 are expected to release quarterlies that would justify a lot of favorable attention, but sometimes the market seems to have an inexplicably lackluster interest or at least an unexpectedly delayed response. Similarly, there is a lot of media coverage about how outrageously profitable these companies are - at some point the market should realize that these outfits are largely in the heating fuel business and it's October so they're likely going to get considerably more profitable from here.

Just wanted to ask what Dan/forum thinks about timelines and confidence levels for some of the S16 - particularly the ones that have higher upside forecast and thus more room to look at 'long shot' options with high strikes / low premiums.

E.g:

CRK Dec 16 $26 for $0.60
CRK Dec 16 $30 for $0.30
CRK Jan 20 $35 for $0.40
CRK Mar 17 $35 for $0.60

SBOW Jan 20 $50 for $0.75
SBOW Apr 21 $65 for $0.65

Timing the market is difficult and option trading is risky. Plus, there is a lot of "noise" impacting oil and gas prices.

I've personally had better luck selling Puts than buying Calls, because the time premium erodes in your favor. When you sell options, you make money if the share price stays flat. To make money buying Calls, the share price must go up faster than the premium erosion to make money.

I do think the Sweet 16 and the upstream companies in our Small-Cap Growth Portfolio and the High Yield Income Portfolio are going to report much better Q3 results than most investors are expecting. That should make share prices go up, but we are in a Bear Market so 'logic" often loses out to "fear".

I think the year-end proven reserve reports for the upstream companies will be very impressive thanks to higher oil, gas and NGL prices in 2022. A profitable upstream company with a strong balance sheet and lots of running room should NEVER trade below PV10 Net Asset Value of their proved reserves (P1). For example, HMENF and IPOOF are still trading at the discount to their 12-31-2021 PV10 NAV.

CRK is going to report STUNNING Q1 2023 results, so long dated calls might work best and their 12-31-2022 PV10 NAV should be much higher than the current share price.

SBOW is going to report large production increases in Q3 and Q4 and a big increase in proved reserves.

NOG is another one that is just starting to draw more attention.

Very good analysis. I will add that what SBOW is worth and what it trades at can be significantly different. And earnings and reserve additions don’t move the needle significantly typically when the stock has so little following like SBOW. It appears that the many acquisitions by SBOW several with significant stock issuance has the goal of building scale and getting noticed by the market, not just an activist waiting to pounce. They have done a really good job but my view is the value will be realized over the longer term and trying to time with out of money calls is about as risky as craps. I have been cashing in on short puts as per Dan at or near the market but extreme caution must be exercised in the current volatile market. One bad down day and your position can become extremely upside down in a hurry. Leverage works both ways and when the market tanks the liquidity in thinly traded stock and its options becomes like catching a falling knife.

I've bought AR calls. The 52 week high is 48.80.

You only pick this one if you believe NG is going higher in 2023.

The current NG 2023 strip is about 5.50, Dan is using 4.65 in his model for 2023
If winter Ng hits 10 this winter , Ar will soar.
The reason I like this name is I'm bullish on NG and they are unhedged in 2023
That means cash flow will soar. Q3 NG was 8. They will have great earnings this year even with the crap hedges. They are earning 2.5 billion Free cash flow and equity is 10.b. (2.5/10) is 25 % roe.

JUNE 30 2023 30 CALLS are 9.50
June 40 2023 calls are 5.30
June 50 2023 is 2.90

You can buy 1 30 and sell 1 40 for a debit of 4.20 and make 5.80 if the stock is above 40 by next June.

If you are more aggressive, I'd buy the nov 35's

This won't work out if NG takes a dive or a warm winter

AR gets a lot more market attention than SBOW and is a fairer bet going long call. Feb 30/40 spread yields about the same max at 40 and will be in dead of cold winter /or not. Option expires 2/17/23. This year they released earning on 2/16. Don't know whether they would time 2022 earnings release before or after option expiry.

Like the discussion on options strategies.

Good luck!

Query: Dead cat bounce this week or real market move upward?

Overall market gains this week due to signs that the Fed may be able to back off on further interest rate hikes.

Silver is telling us something.

From Trading Economics:
"Spot silver rose further to $21 per ounce, the highest in three months and following a 9.2% jump in the previous session, propelled by safe-haven bids as bond yields fell and the dollar weakened. The rally comes after fresh data showed manufacturing activity in the US expanded the least in over two years, pointing to a slowdown in the world's largest economy and reducing the need for more aggressive monetary policy tightening."

I highly recommend at all of you listen to the replay of today's EPG webinar that was hosted by SilverCrest Metals (NYSE:SILV).

you are going to want to focus on liquid momentum which means AR/CRK. Selling put spreads to fund right tail can offset some cost