Sweet 16 Update - June 8

[dan_s]

We are publishing The View From Houston early this coming week, so I will be brief here.

An updated Sweet 16 spread sheet that compares my Fair Value Estimates to First Call's Price Targets is available under the Sweet 16 Tab to all members. You must log in to see it. Tab One is a summary of our quarterly forecasts for each company. Detailed forecasts can be seen by click on the company logos.

Concho Resources (CXO) was added to the Sweet 16 on 6/6. It replaces CRZO, which just goes to the Small-Cap Growth Portfolio. CRZO was the smallest company in the Sweet 16, so it was moved just to make room. I still really like CRZO.

I added CXO because the Wolfcamp and several shales are showing incredible upside potential from horizontal drilling in the West Texas Delaware Basin. I want a lot of exposure to that region. AREX, EOG, XEC and ROSE also have significant acreage in the basin. You should all read what EOG is saying about the Delaware Basin.

The Sweet 16 remains heavily weighted to oil, so Q2 results are going to be outstanding. The Sweet 16 was up slightly for the week but still trading 42% below my combined Fair Value Estimate and less than 6X CFPS. IMHO a group with this much running room and double digit production and reserve growth locked in for several years should be trading at a much higher multiple of cash flow, especially in today's very low interest rate environment.

Helmerich & Payne (HP) announced a big increase in their dividends this week.

We are working on updated profiles for ROSE and SM.

I will be in Iceland June 11-19, so my posts will be limited.