Sweet 16 Update - April 21

[dan_s]

I am finishing up the newsletter today, so this will be short. Also, no podcast this weekend. I will record a podcast on Wednesday or Thursday because Susan & I will be on a cruise ship (Celebrity APEX) April 26 to May 2. I will have internet access, so I will be checking the markets on sea days.

The Sweet 16 lost 4.22% during the week ending April 19th, but it is still up 13.71% YTD. < WTI oil price pulled back $3/bbl due to all of the "noise" coming out of the Middle East. New sanctions against Iran won't take much oil off the market.

The S&P 500 Index lost 3.27% last week and is now only up 3.83%. Energy Sector is doing much better than most other sectors.

Diamondback Energy (FANG) moved back into the lead. It is now up 29.44% YTD. < Still 6.1% below my valuation of $213.00
Close behind are:
> Permian Resources (PR) up 25.59% YTD
> Crescent Point Energy (CPG) up 25.40% < Falling oil price differential in Western Canada helps CPG more than it helps Baytex (BTE) because Baytex is now focused on the South Texas assets acquired from Ranger Oil. South Texas oil and gas prices are better than the Permian because of adequate pipeline access.
> SM Energy (SM) up 24.20% YTD

Sweet 16 stocks that are trading at more than 80% discounts to my valuations: BTE, SBOW, VTLE.
> Baytex is the largest and has the most free cash flow. Plus it pays a dividend. BTE should be getting higher bids.
> SilverBow will report a big increase in production from Q4 to Q1. It just needs to move past the "noise" of the takeover attempt.
> Vital should also report a production increase from Q4 to Q1, thanks to acquisitions that closed on 12/21 and 2/5. It would help if they would announce a plan to start paying dividends later this year. It amazes me that this stock still trades a ~2X operating cash flow per share. Vital was the most profitable company in the Sweet 16 for both 2022 and 2023 with reported EPS of $37.67 and $34.32.

Carlos Slim's big equity stake in Talos Energy (TALO) is "interesting". It is nice to have super rich shareholder that have a vested interest in the success of the company. BTW on a Boepd basis, Talos has the most crude oil production in the Sweet 16. Production mix is 71% oil, 8% NGLs and 21% natural gas. They sell their production into the Gulf Coast market that pays much higher gas prices than what companies are getting in the Permian Basin. Talos' realized ngas price was $3.67/mcf in Q4.

Reuters: "Mexico Hands Over Key Gas Field to Carlos Slim. According to Mexican press reports, the country’s state oil company Pemex has agreed to hand over control of its key Lakach natural gas project in the Gulf of Mexico to Grupo Carso (BMV:GCARSO), the holding company of billionaire Carlos Slim."