Energy Prospectus

I have updated all of my forecast models and updated the Sweet 16 summary spreadsheet. It has been posted under the Sweet 16 Tab. This group (like the entire energy sector) pulled back in early December on market fears about falling oil prices and what the Fed was going to do. The Sweet 16 has bounce back some, but it is still trading more than 47% below my Fair Value Estimate.

The 2nd tab of the spreadsheet shows my Fair Value Estimate compared to First Call's price target for each company.

I am working on the newsletter (which will be published on Monday) all day today. If you have any questions about the Sweet 16 companies post them here. I will check in from time-to-time all day and answer any questions.

SFY - not on the big list - but what do you think about timing of any announcement of their properties sale?

Also - when will the Sweet 16 changes be announced?

EXXI - how much do you think the risk of an off shore spill devalues EXXI? I am hesitant to hold a big position as I fear a big spill would simply wipe them out.

Bob

SFY should announce the sale of the Central Louisiana asset package in the first quarter. Higher gas prices really help SFY and the higher commodity prices also should increase the bids for this package as buyers will be able to hedge production at a much higher price than just a few months ago. I think this sale + good results in the Eagle Ford will push SFY over $15. Good results in the Eagle Ford are key to them reaching my valuation of $30/share.

DNR and EXXI are being dropped from the Sweet 16 simply because they don't meet my threshold of 10% annual production growth. IMO both a significantly undervalued by the market.
> DNR should get more "Growth & Income" funds buying early in 2014.
> EXXI is selling at less than half NAV, which is ridiculous

EXXI has very little exposure to an offshore spill on their operated properties. They are very old fields where pressures are well known. EXXI has a solid technical team and they use top notch service companies. Their Ultra-Deep Program wells are operated by first class companies which know the risk. There are much tighter controls since the Macondo blowout, but there is always a risk.

MTDR and SN are being "promoted" to the Sweet 16.

EXXI is being added to the Small-Cap Growth Portfolio.

DNR will go on our Watch List and we will update our profile each quarter.

I just noticed that SN made a management change at the top effective yesterday with notice to the public made only Dec. 26. That's very curious. I know nothing more as I've just started to look at SN and MTDR.

We will publish an update profile on MTDR tomorrow morning and SN early next week.