Sweet 16 Update - Jan 23

[dan_s]

We have a live webinar today starting at 11:30 CT. Paul Colborne, the CEO of Surge Energy will be joining me.

I have reviewed and updated all 16 individual company forecast models for the companies in our Sweet 16 Growth Portfolio. They have been posted to the EPG website. You can find them under the Sweet 16 tab.
All of the forecast models are macro driven Excel spreadsheets. You can download them to your computer. From your computer you can change production and commodity price assumptions for each future period to see how the changes impact revenues, net income and operating cash flow.

I have also decided to move APC Corp. (APC) back to my Watch List and move Civitas Resources (CIVI) from our High Yield Income Portfolio to the Sweet 16. There is nothing wrong with APC, but for some reason the Wall Street Gang is not as bullish as I am. CIVI is up 18.8% YTD, but it is still trading at a deep discount to my valuation of $84/share, which is just 2.5 X annualized operating cash flow per share for 2024 to 2026. TipRanks' consensus price target is $72/share. The two most recently updated price targets are from highly respected energy sector analysts at Truist Financial on January 13th (PT = $80) and Mizuho Securities on January 16th (PT = $78).

All of the forecasts are now based on the following oil & gas prices:

Period: WTI Oil / HH Ngas
Q4 2024: $70.00 / $2.75

Q1 2025: $75.00 / $3.50
Q2 2025: $77.50 / $3.25 < Global demand for crude oil will increase by ~2 million bpd from Q1 to Q2. It happens each year.
Q3 2025: $80.00 / $3.75
Q4 2025: $77.50 / $4.25

YR 2026: $80.00 / $4.00 < Team Trump is going to be very bullish for U.S. natural gas prices. Keep in mind that crude oil prices are set by global supply/demand fundamentals. Natural gas prices are set by regional fundamentals. The U.S. and Canada have several regions that have much different natural gas prices than the Henry Hub prices show above. For example, natural gas prices in the Permian Basin will continue to be much lower than HH prices and the Tier One area in Southern Louisiana Ngas prices will be higher. Antero Resources (AR) was added to the Sweet 16 because it sells ~70% of its Ngas into the Tier One area.

EIA's next two natural gas storage reports (today and Jan. 30) will show big draws from storage and that as of January 31st Ngas in storage will be approximately 140 Bcf below the 5-year average.

All of the Sweet 16 produce a combination of crude oil, natural gas and NGLs. It is VERY IMPORTANT that you know the mix of production for each upstream company in your portfolio and how much that they have hedged. You can find this information at the bottom of each company's forecast model.