Earthstone Energy (ESTE) Valuation Update - Oct 12
Posted: Wed Oct 12, 2022 6:15 pm
ESTE is one of my Top Picks in our Sweet 16.
Why?
> Earthstone is going to report BIG INCREASES in production for Q3 and Q4 thanks to the BigHorn and Titus Acquisitions, which have closed.
> From Q1 production of 35,509 Boepd, they are on pace to a 2022 exit rate close to 100,000 Boepd.
> This Company does not get the Wall Street Gang coverage that it deserves. RBC Capital's price target was $21/share on 8/11.
ESTE closed on Oct 12 at $13.98. First Call's price target is $28.00 and my updated valuation is $36.00.
This is a perfect example of why you pay BIG BUCKS for your EPG membership.
> I've known this management team for over a decade.
> They are rock solid and they have strong backing from shareholders that have made significant profits on their previous companies. We tripled our investment in GeoResources and ESTE looks better.
> YOY production growth will be ~200% in 2022, followed by close to 50% YOY production growth in 2023 even if they don't make more acquisitions.
> Operating cash flow went from $232.4 million to over $1 billion this year. Based on my forecast, operating cash flow will exceed $1.5 billion in 2023.
My CURRENT VALUATION is $33/share. A 12-month price target of $45/share is justified.
My updated forecast/valuation model will be posted to the EPG website on Thursday morning.
Why?
> Earthstone is going to report BIG INCREASES in production for Q3 and Q4 thanks to the BigHorn and Titus Acquisitions, which have closed.
> From Q1 production of 35,509 Boepd, they are on pace to a 2022 exit rate close to 100,000 Boepd.
> This Company does not get the Wall Street Gang coverage that it deserves. RBC Capital's price target was $21/share on 8/11.
ESTE closed on Oct 12 at $13.98. First Call's price target is $28.00 and my updated valuation is $36.00.
This is a perfect example of why you pay BIG BUCKS for your EPG membership.
> I've known this management team for over a decade.
> They are rock solid and they have strong backing from shareholders that have made significant profits on their previous companies. We tripled our investment in GeoResources and ESTE looks better.
> YOY production growth will be ~200% in 2022, followed by close to 50% YOY production growth in 2023 even if they don't make more acquisitions.
> Operating cash flow went from $232.4 million to over $1 billion this year. Based on my forecast, operating cash flow will exceed $1.5 billion in 2023.
My CURRENT VALUATION is $33/share. A 12-month price target of $45/share is justified.
My updated forecast/valuation model will be posted to the EPG website on Thursday morning.