Energy Prospectus

I've taken a hard look at the four gassers in the Sweet 16 and I've adjusted my valuations as follows:

Antero Resources (AR): Lowering my valuation by $5.50 to $29.50. TipRanks price target is $29.80.

Comstock Resources (CRK): Lowering my valuation by $0.75 to $18.00. TipRanks price target is $13.00.

EQT Corp. (EQT): Lowering my valuation by $2.50 to $45.00. TipRanks price target is $45.00.

Range Resources (RRC): Holding my valuation at $31.00. TipRanks price target is $34.06.
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Antero has the least amount of their production hedged and I now expect them to report a loss for Q2. EQT should have a big mark-to-market gain on their outstanding hedges, so they should report a nice profit, but operating cash flow will be lower quarter-to-quarter.

All four of them will be fine and Q2 2023 results should be the worst quarter of the year and probably the worst quarter for the remainder of the decade. Note that my valuations are still higher than where these four stocks are trading today, and I believe the Wall Street Gang will be more forward looking when they adjust their price targets after they digest Q2 results and fresh guidance. The long-term outlook for natural gas is very bullish, but 2023 and 2024 will be "tight".

Part of the reason for my lower valuations is that I expect them all to lower their production guidance.

Today I am focused on updating all of the Sweet 16 forecast/valuation models. Other than the gassers, the other 12 will only have minor adjustments to my current stock valuations.
I will be writing the bulk of the newsletter on Saturday, so no podcast this weekend.

Listen to the recorded interview with Anas Alhajji that I posted under The View from Houston tab. It supports a lot of what my view of the global oil market will be in the newsletter.

My updated forecast/valuation models for the companies in our Small-Cap Growth and High Yield Income Portfolios have been posted to the EPG website.

This is my shocked face

I predicted that lowered estimates and results were inevitable and this is why I'm sitting on the sidelines. I shorted Ar today and I will short CRK at 12.50 or better.

Many company's will be negative FCF this qtr and July numbers are still weak.

NGL's have been hammered.

I like the names better with NG over 3.25

Be careful shorting gassers this time of year because a lot of fund managers (that don't really know much about oil & gas) move money into gassers in August and September just because they know gas demand goes up each winter.

All four of our gassers are going to be fine. They have MUCH BETTER balance sheets than they had two years ago and they can easily adjust their drilling programs to live within cash flow.

I do agree that AR's dependence on NGLs is a problem for them since propane inventories are so high.

I'm eager to see if CRK is still getting a premium on their gas from the LNG exporters.