Sweet 16 Update as of June 16

[dan_s]

Each weekend I update the Sweet 16 Growth Portfolio and I compare my Fair Value estimates (my SWAG of the current break-up value of each company) to the current First Call Target Price (which you can find on Yahoo Finance). For most of the companies in the S-16, my Fair Value estimate is close to the First Call target but there are a few exceptions. EPG members can find the table under the Sweet 16 Tab.

As of June 16th closing stock prices, the Sweet 16 is now trading 78% below my Fair Value estimates and slightly less than that compared to the First Call Target Prices.

I have noticed that over the last two weeks the First Call Target Prices have stabilized and many have started to drift back up as the analysts gain more confidence in the oil price. Increasing natural gas prices are helping CRZO, GST and RRC. All three are in the Sweet-16 because they are now focused on increasing their liquids production. I am expecting very strong results from CRZO's Eagle Ford drilling program.

Let's use EOG Resources as an example since I just updated the profile and my forecast model.
1. EOG closed at $96.64 on Friday. This compares to my Fair Value estimate of $141.85 and the First Call Price Target of $125.19.
2. EOG is in much better shape today than it was a year ago but the share price is lower. They have de-risked much of their Eagle Ford and Bakken acreage + their Barnett Combo (oil) and Permian Basin results are very strong.
3. A total of 14 analysts provide EPS estimates to First Call and two of them have increased their estimates in the last 30 days, primarily as a result of the company's increased production guidance.
4. IMHO there is a very good chance that EOG's current holdings in the Eagle Ford and the Bakken are worth more than the entire market cap of the company. If they put their Eagle Ford acreage in a dataroom the bidding war would be impressive to watch. They hold the best acreage in the play and they also hold some of the best acreage in the Bakken.

Based on my forecast models, 13 of the 16 companies are going to report higher EPS in Q2 than they reported for Q1. I'm expecting some very impressive results from recent completions in the Bakken and the Eagle Ford for several of our companies.

Rosetta Resources (ROSE) is almost a pure play on the Eagle Ford. I just assigned it to one of our interns for an updated profile.

[dan_s]

You may have noticed that Mitcham Industriies (MIND) has bounced back since the dip after their Q1 results, although fantastic, disappointed some investors. Three analysts have now updated their forecast models for MIND and all three are estimating higher earnings than what I have in my forecast for this year. Seamap sales are very difficult to forecast. Two Seamap equipment sales were pushed from Q1 to Q2 causing the miss, so I'm sure that is where the difference is between my forecast and what the analysts now expect.

MIND is definitely on-track to report all-time record earnings and cash flow per share this year.

More important than earnings are the fact that MIND is now debt free (current assets exceed total debt) and they should generate close to $5.00 per share in cash flow this year and next. The company is gaining market share in both South America and Eastern Europe.

You can find my Fair Value estimate under the Sweet 16 Tab.

[dan_s]

Carrizo Oil & Gas (CRZO) = "Screaming Buy"

My CFPS forecast is now $6.36 for 2012 and $11.31 for 2013
compare to
First Call's CFPS forecast of $6.92 for 2012 and $11.61 for 2031

Risk/Reward looks very good on this one. Their liquids production, primarily from the Eagle Ford, should show impressive increases quarter after quarter. Any rebound at all in natural gas prices will be a big plus.