Sweet 16 Update - January 12

[dan_s]

Except for Carrizo Oil & Gas (CRZO), all of the Sweet 16 are off to a great start in 2013. This week the larger Bakken companies (CLR, OAS and WLL) made big moves. CLR now leads the pack, up 11.25% YTD. KOG is a pure play on the Bakken but it seems to be stuck in a wait and see mode. KOG management has a long history of "over-promise and under-deliver". If they do hit their stated exit rate of 27,000 boepd this one should take off.

CRZO announced the sale of their North Sea assets, which I consider a good move. It shores up the balance sheet and allows them to focus on the Eagle Ford and Niobrara. Maybe some European shareholders dumped the stock on this news. This morning I took a hard look at my forecast model for the company and it still looks rock solid to me.
> First Call's price forecast of $32.09 is way below my Fair Value Estimate.
> 17 analysts have submitted forecasts for 2013 to First Call. For this late in the year, there is an incredibly wide spread of $1.05 to $4.51 EPS forecast for 2013 submitted to First Call. IMO this company is not that difficult to figure out.
> Based on my forecast model, CRZO should generate approximately $10 cash flow per share ("CFPS") and more than enough to cover their capital expenditure budget for this year.
> The only negative that I see is that production is expected to dip from Q3 to Q4, but year-over-year production growth will be 24% for 2012 and should be in that range again in 2013.
> CRZO is still viewed as a "gasser" by many on Wall Street. On a boe basis, 54% of 2013 production will be natural gas. However, more than 75% of 2013 revenues will be from the sale of crude oil and NGLs. If gas prices do improve, it will be a huge plus for Carrizo.
You can find my updated forecast model for CRZO under the Sweet 16 Tab.

Swift Energy (SFY) is now up 4.4% YTD but it is still way under where it was when I added it to the portfolio. 3rd quarter production was down, but we should see a nice rebound in Q4. First Call's price target of $28/share looks reasonable to me. I will probably move SFY to our Small-Cap Growth Portfolio. I was going to move SD into the Sweet-16 but decided to wait on Q4 results. SD is a complex one to forecast but I do want more exposure to the Mississippi Lime play in Oklahoma.

I think Energy XXI (EXXI) has the potential to draw a lot of attention when they issue their fiscal Q2 results. The company should generate around $9.80 CFPS this fiscal year. With HUGE exploration upside, it should be trading in the 6X to 8X CFPS range.

Since HP and EXXI are on fiscal years, they should release quarterly earnings ahead of the pack.

The Sweet 16 is heavily weighted to oil. My forecasts and Fair Value Estimates are based on $85/bbl WTI and $3.50/mmbtu for natural gas for 2013. If oil prices remain over $90/bbl, my estimates will be going up.

[dan_s]

I have just posted my updated Sweet 16 spreadsheet to the website. Only EPG members can see it. You must log on to the website and click on the Sweet 16 Tab. Then click on the Sweet 16 Forecasts link.
> The first tab shows my EPS forecasts for 2012 and 2013, plus my CFPS forecasts for 2013
> The second tab compares my Fair Value Estimates to First Call's Price Targets for each company.

I update this spreadsheet each weekend. I compare my forecasts to the current First Call EPS and CFPS forecasts each weekend. If there is a big change by First Call, I take a hard look at my forecast model for that company.

I will be updating individual company forecast models as quickly as I can after Q4 results are released.

I am expecting several of the Sweet 16 to report very impressive growth in their proven reserves, especially the Bakken & Eagle Ford companies.