Sweet 16 Update - July 14

[dan_s]

There was very little movement in the Sweet 16 last week, despite improving oil & gas prices. Share prices are likely to drift sideways until 2nd quarter results start coming out late this month. RRC and WLL will be the first to report 2nd quarter results on July 24 & 25. CRK and GPOR report on July 30.

The portfolio is trading 70% below my Fair Value estimates.

Stocks trading at less than half my Fair Value estimates are: DNR, EXXI, MIND, PBKEF and WLL. PetroBakken offers high dividend yield and it has strong production growth locked in. See our profiles under the Sweet 16 Tab.

Former S-16 member, Plains E&P (PXP) had an outstanding operations update last week and I will probably be adding it back to the portfolio after I see all the Q2 results. RRC is getting close to my Fair Value Estimate but it is still way below First Call's price target of $74.60. RRC is in the S-16 because it gives us the most exposure to the Marcellus Shale and it is a prime takeover target. If you want a lot of exposure to natural gas then you should take a hard look at RRC.

Others that will benefit from rising natural gas prices are: CRZO, CRK, EOG and SM

FX Energy (FXEN) had the best week, up over 5%. On July 11th the company announced increased production and progress on several high impact wells. Kutno-2 is the big one. It is a "Game Changer" if successful.

I am expecting solid 2nd quarter results across the board. In fact, several companies will report "eye popping" earnings per share as the mark-to-market adjustments on their hedges will be huge this quarter. Keep in mind that those are non-cash earnings. Stay focused on cash flow per share. For example, PXP should report EPS of more than $2.80/share compared to the First Call estimate of $0.66. You can find my forecast model for PXP under the Watch List Tab.