Sweet 16 Update - Sept 2

Post Reply
dan_s
Posts: 34921
Joined: Fri Apr 23, 2010 8:22 am

Sweet 16 Update - Sept 2

Post by dan_s »

Our Sweet 16 Growth Portfolio gained 6.82% during the week ending September 1st and it is now up 21.49% YTD.
The S&P 500 Index also had a good week gaining 2.86% and it is now up 17.61%.

If WTI does move over $90/bbl and HH can move over $3.00 in Q4, the Sweet 16 has a shot at finishing the year with a 50% YOY Gain. It currently trades at a 40.3% discount to my updated valuations.

Range Resources (RRC) is now 9.3% over my valuation of $30.25, but I rate it a HOLD. RRC is a rock solid company with close to 20 TCF of proven reserves in Appalachia. The long-term outlook for CRK, EQT and RRC is very good.

Callon Petroleum (CPE) is finally up 9.68% YTD and it still trades at less than half of my valuation of $84.50. It still trades below book value, which make zero sense to me. Callon is a potential takeover target. VTLE and MTDR are also Permian Basin takeover targets.

Permian Resources (PR) now leads the pack, up 53.51% and I think it will go to at least $16/share before the merger with Earthstone Resources (ESTE) closes in December. Every member of the Wall Street Gang loves the merger, so the First Call price target (now $16.15) will keep drifting higher. This is why mergers and sales are two totally different things. This merger gives those of you that own ESTE more upside. You will get more shares in a company with a lot of upside. If you own ESTE, hang tough because it will drift higher in lockstep with PR.

Northern Oil & Gas (NOG) will benefit from the ESTE/PR merger.

Vital Energy (VTLE) trades at the deepest discount to my valuation.

SilverBow Resources (SBOW) still has a lot more upside.

I will be highlighting our Small-Cap Growth Portfolio companies in my Saturday podcast.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34921
Joined: Fri Apr 23, 2010 8:22 am

Re: Sweet 16 Update - Sept 2

Post by dan_s »

My Sweet 16 Summary Spreadsheet is now on the EPG website.
> All of my valuations are up-to-date and you can find updated profiles for each company on the EPG website under the Sweet 16 Tab.
> On the first tab I break out Q3 and Q4 EPS forecasts.
> My EPS forecast are "Adjusted Net Income per share" which is comparable to First Call EPS forecasts.
> Note in column Q that the Sweet 16 still trades at very low PE ratios. The group average PE ratio is 8.54, less than half of the S&P 500 average.
> IMO columns R and S are the most important. Note that several of the Sweet 16 trade at less than 3X operating cash flow per share; that's very cheap for companies of this quality.
> All 16 companies are now free cash flow positive.
> Q3 results should be much better than Q2 results for all 16 companies.

Keep your portfolio heavily weighted to crude oil. The three gassers (CRK, EQT and RRC) will be fine, but the near-term upside is in crude oil producers. CRK is the closest to a pure gasser.
Dan Steffens
Energy Prospectus Group
Post Reply