Sweet 16 Update - Oct 8
Posted: Sat Oct 08, 2022 11:05 am
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For the week ending October 7, the Sweet 16 gained 18.42% and is now up 52.80% YTD.
The S&P 500 Index gained 1.13%, but is still down 23.64% YTD. "FEAR of the Fed" is the primary reason for this Bear Market.
OPEC+'s decision to reduce their official oil production quotas by 2,000,000 barrels per day (double what the market was expecting) caused a big oil price rally. WTI went from a closing price on 9/30 of $79.33 to a closing price of $92.64/bbl on October 7. It moved over $93/bbl in after-hours trading. Most of the move was short covering, but several of the "Alpha Dogs" in the Wall Street Gang are now forecasting $100/bbl by year-end.
Actual oil and natural gas prices for Q3 did come in very close to what I used in my forecast models ($90/bbl for WTI and $8.00/mcf for HH ngas).
My current valuations are still based on the following:
> Q4: $95/bbl WTI and $9.00/mcf for HH
> 2023: $100/bbl WTI and $5.00/mcf for HH
If I were updating my oil & gas price deck today, I would lower the Q4 HH gas price to $8.00 and raise my 2023 HH gas price to $6.00, which would actually raise my valuations for our five gassers (AR, CRK, EQT, RRC and SBOW). Raymond James recently raised their 2023 HH price forecast to $7.00. The U.S. natural gas market is much different than the global oil market. Natural gas prices in North America over the next five quarters will depend on the weather, but I do think the worst case for natural gas prices is way above the $3.00 range that we were stuck in for almost 14 years. With a lot more LNG export capacity coming online by 2025, I think there is a good chance the U.S. natural gas price moves to 1/6th the price of oil (the energy equivalent price) for the back half of this decade. Send me an email if you'd like to read the full Raymond James report. (dmsteffens@comcast.net)
CRK up 118.4%, EQT up 97.9% and AR up 84.7% lead the Sweet 16 this year. As I posted yesterday, Range Resources (RRC) looks very good and I do expect them to announce a dividend program by the end of October. SilverBow Resources (SBOW) closed Friday at a 247% discount to my valuation of $105/share. SilverBow is going to report more than a 25% increase in production from Q2 to Q3
Matador Resources (MTDR) made a big move last week, gaining $13.26 to $62.18 and moving into 4th place, up 68.4% YTD. My valuation is $81.00.
Callon Petroleum (CPE) is still down 5.1% YTD, but it made a nice move last week and it should move into positive territory if their Q3 results match my forecast. CPE is actually going to end the year with earnings per share of close to $15/share, which compares to $5.95 EPS that they reported in 2021. There is nothing that I can see that justifies CPE trading at less than 2X 2022 operating cash flow per share.
As a group, the Sweet 16 closed on Oct 7 at just 2.79 X my 2022 operating cash flow per share forecasts. There is still a lot of upside for the Sweet 16. < You can see my up-to-date operating cash flow per share forecast for each company under Tab 1 of the main Sweet 16 Excel spreadsheet, which will be updated and posted to the EPG website this afternoon.
I expect Biden's draws from the Strategic Petroleum Reserves (SPR) to end soon after the mid-terms, which should push WTI over $100/bbl by the end of November. This world is "short oil" and there is no "Quick Fix" for the damage done by the Climate Change Wackos. High energy prices are here to stay unless we have a "Covid-23" or a nuclear war with Russia. We live in very crazy times!
My weekly podcast will be posted to the EPG website this afternoon.
PS: We have live webinars on Tuesday, October 11 (Solaris Resources) and Wednesday, October 12 (Hemisphere Energy). You must register on the EPG website home page to attend the live events. I am very bullish on both companies.
For the week ending October 7, the Sweet 16 gained 18.42% and is now up 52.80% YTD.
The S&P 500 Index gained 1.13%, but is still down 23.64% YTD. "FEAR of the Fed" is the primary reason for this Bear Market.
OPEC+'s decision to reduce their official oil production quotas by 2,000,000 barrels per day (double what the market was expecting) caused a big oil price rally. WTI went from a closing price on 9/30 of $79.33 to a closing price of $92.64/bbl on October 7. It moved over $93/bbl in after-hours trading. Most of the move was short covering, but several of the "Alpha Dogs" in the Wall Street Gang are now forecasting $100/bbl by year-end.
Actual oil and natural gas prices for Q3 did come in very close to what I used in my forecast models ($90/bbl for WTI and $8.00/mcf for HH ngas).
My current valuations are still based on the following:
> Q4: $95/bbl WTI and $9.00/mcf for HH
> 2023: $100/bbl WTI and $5.00/mcf for HH
If I were updating my oil & gas price deck today, I would lower the Q4 HH gas price to $8.00 and raise my 2023 HH gas price to $6.00, which would actually raise my valuations for our five gassers (AR, CRK, EQT, RRC and SBOW). Raymond James recently raised their 2023 HH price forecast to $7.00. The U.S. natural gas market is much different than the global oil market. Natural gas prices in North America over the next five quarters will depend on the weather, but I do think the worst case for natural gas prices is way above the $3.00 range that we were stuck in for almost 14 years. With a lot more LNG export capacity coming online by 2025, I think there is a good chance the U.S. natural gas price moves to 1/6th the price of oil (the energy equivalent price) for the back half of this decade. Send me an email if you'd like to read the full Raymond James report. (dmsteffens@comcast.net)
CRK up 118.4%, EQT up 97.9% and AR up 84.7% lead the Sweet 16 this year. As I posted yesterday, Range Resources (RRC) looks very good and I do expect them to announce a dividend program by the end of October. SilverBow Resources (SBOW) closed Friday at a 247% discount to my valuation of $105/share. SilverBow is going to report more than a 25% increase in production from Q2 to Q3
Matador Resources (MTDR) made a big move last week, gaining $13.26 to $62.18 and moving into 4th place, up 68.4% YTD. My valuation is $81.00.
Callon Petroleum (CPE) is still down 5.1% YTD, but it made a nice move last week and it should move into positive territory if their Q3 results match my forecast. CPE is actually going to end the year with earnings per share of close to $15/share, which compares to $5.95 EPS that they reported in 2021. There is nothing that I can see that justifies CPE trading at less than 2X 2022 operating cash flow per share.
As a group, the Sweet 16 closed on Oct 7 at just 2.79 X my 2022 operating cash flow per share forecasts. There is still a lot of upside for the Sweet 16. < You can see my up-to-date operating cash flow per share forecast for each company under Tab 1 of the main Sweet 16 Excel spreadsheet, which will be updated and posted to the EPG website this afternoon.
I expect Biden's draws from the Strategic Petroleum Reserves (SPR) to end soon after the mid-terms, which should push WTI over $100/bbl by the end of November. This world is "short oil" and there is no "Quick Fix" for the damage done by the Climate Change Wackos. High energy prices are here to stay unless we have a "Covid-23" or a nuclear war with Russia. We live in very crazy times!
My weekly podcast will be posted to the EPG website this afternoon.
PS: We have live webinars on Tuesday, October 11 (Solaris Resources) and Wednesday, October 12 (Hemisphere Energy). You must register on the EPG website home page to attend the live events. I am very bullish on both companies.