Energy Prospectus

The spreadsheets below have been posted under the Sweet 16 Tab:
> Sweet 16 Growth Portfolio: Summary of Net Income & Cash Flow Forecast models as of 9-30-2012 (Excel)
> Sweet 16 Fair Value Estimates compared to First Call's Price Targets as of 9-30-2012 (pdf)

The Sweet 16 pulled back with the general market and oil prices last week. GPOR and SM were the only two up for the week.
All adjustments by First Call to their price targets were up.

We now know for sure that 3rd quarter results are going to be very strong for the S-16. Realized crude oil prices will be $8 to $10 per bbl higher and natural gas should be up around 50 cents per mcf. Production growth, especially from the Bakken companies will be very strong.

I am eager to see more strong results from Gulfport Energy (GPOR) in their Utica Shale drilling program.

Take a hard look at our work on Comstock Resources (CRK). If I am right about natural gas prices, CRK could be in very good shape heading into 2013. Plus, they should report some good results in the Eagle Ford.

I have noticed over the last few weeks that analysts' forecasts and price targets for Carrizo Oil & Gas (CRZO) are getting closer and closer to my Fair Value estimate. CRZO moved into the Sweet 16 because I am bullish on their Eagle Ford oil production growth. It also gives us nice exposure to increasing natural gas prices. Assuming $90/WTI and $3.25 for NG, I have CRZO's 2013 cash flow at over $12/share.

MIND is going to be fine. Q3 results will be a bit soft but Q4 is going to be very strong.

Top Takeover Targets: WLL, KOG, OAS and CLR (Shell really wants into the Bakken).

Here is the latest on FXEN as of today:

1. Apparently they are shooting 3D seismic at the Kutnos site today, to better define something they are looking for structurally about three miles under the surface. The 3D seismic data might give them an idea of how much deeper they need to drill to get through the Rotliegend. At this stage you want to penetrate all the potential zones, but you don't want to continue drilling mindlessly without a target (a deeper target may not exist, or it might be too deep to go after).

Remember the Rotliegend is a very thick Permian age formation that sometimes has different zones that are productive - due to the deposition sometimes the permeabilty between the different levels of Rotliegend is reduced - meaning a well might have to be completed in the lower Rotliegend, mid-Rotliegend, and upper Rotliegend since the gas does not migrate up and down in the formation.

2. We have been told that the company applied to amend their permit to drill 500 m deeper, but might not drill the entire 500 m if they find the gas they are looking for at a shallower depth.

3. We were told the town mayor quoted in a Polish newspaper has no clue if the well is good or not - apparently he indicated it was a good gas well in the article.

4. Also keep in mind two things:

A. It is a lot easier to make a commercial gas well when gas is selling at $12 a mcf like it is in Poland, versus the $2.80 mcf we are seeing here in the US. The spreadsheet using Polish priced gas looks a lot sweeter

B. The fracing technology, if they need to frac, is light years ahead of where it was at even a decade ago. The size of the pumps, the proppants (synthetic versus sand), and science have come a long long way. So if the formation is tight it still might make commercial sense to develop it.

5. The 5 analysts who cover the stock have it at a consensus 'buy' rating and have a $9.52 twelve month price target on the shares (they are at $7.70 today). No value has been given to the share price for Kuntos-2 (maybe rightfully so) apparently

6. The 3D seismic on the Lisewo SE field could indicate a field as large as the PGNiG Ratlin field (discovered in 1985 and still going strong). If we have 'closure' - and we will know soon - additional developmental wells to the Lisewo-1 couild add $10 per share to the PV10 NAV at FXEN. This company is no one pony show.

Stay tuned, carry on, and keep calm.