Sweet 16 Updates - Nov 12

[dan_s]

I will be on vacation November 12-18 in Puerto Vallarta, Mexico. This is "Susan's Birthday Vacation" so it will be more expensive than normal vacations.

Today we are sending out updated profiles on FANG, VTLE and NOG

Today I am "officially" adding Baytex Energy (BTE) to the Sweet 16. I will finish updating the profile today and it should be posted to the EPG website this afternoon. Baytex replaces Earthstone Energy (ESTE), which merged with Permian Resources (PR) on November 1st. We made a nice gain on ESTE and PR still has a lot more upside from where it closed on Friday. My current valuation of PR is $21.00

PR and Ovintiv (OVV) are the only two Sweet 16 companies, which still need updated profiles. I HOPE to get them updated today, but the To Do List is long today. My forecast/valuation models for PR and OVV have been updated on the EPG website.

Despite the recent pullback in oil & gas prices, all of the Sweet 16 companies are in very good shape.
> They've all been very profitable through 9-30-2023 and 4th quarter earnings will be solid.
> As a group, the Sweet 16 closed on Friday at a 68% discount to my valuations.
> The portfolio is trading at a combined 3.67 X Adjusted Operating Cash Flow Per Share; very cheap for group of this quality. < VTLE closed on Friday at just 1.12 X my 2023 CFPS estimate. Vital balance sheet is in good shape (much better than a year ago) and it will once again be one of the most profitable companies in the Sweet 16 this year. It was the most profitable company in the Sweet 16 in 2022 on a per-share basis.

Most of the Sweet 16 are aggressively buying back their common stock because they know how cheap the stock is. Baytex told us about their aggressive stock buyback at our Houston luncheon on Wednesday. The Company's new CEO made a nice presentation, and their team has a lot of energy.

I will record a podcast later today.

[Lbark]

Just read the updated profile on vital energy. Cannot understand why it is so cheap. Have a nice holding in it now and looking to add. Any reason management has not been doing insider buying.
You would think if these prices they would want to increase their holdings. Also, what are the chances of starting a dividend.

[dan_s]

The best thing Vital can do with FCF is generate steady production growth quarter after quarter. The current CEO "Gets It".

The last thing they need to do is a stock buyback because the low outstanding share count is a problem already.

Some people tell me that the Company's convertible debt is a "problem" because of the potential dilution. If those debt holders do convert to stockholders, it would do wonders for the balance sheet ratios because that debt would become equity. Keep in mind that convertible debt is rarely converted.

There is nothing that I can see which justifies VTLE trading below book value.

Some of the Wall Street Gang is starting to figure this one out. Stifel and Siebert WS rate it a BUY with price targets of $106 and $102, respectively.

[dan_s]

Today I finished updating the profiles for BTE, PR and OVV. They will all be posted to the EPG website by tomorrow. We are sending out the profiles to all members: BTE on Sunday and PR & OVV on Monday morning.

All 16 of the profiles and forecast models are now up-to-date.

I can now enjoy my vacation!

[dan_s]

When I return from vacation on November 19 I will focus on the companies in our Small-Cap Growth Portfolio and I will take a hard look at Crescent Point Energy (CPG) that recent announced a MAJOR ACQUISITION on November 6th.