Sweet 16 Update - January 18

[dan_s]

An updated Sweet 16 spreadsheet has been posted under the Sweet 16 Tab:
> Tab 1 is a summary of the EPS and CFPS forecasts,
> Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 1-18-2014

Not much has change this week, but two more stocks have moved positive on the year (EOG and SM). The Sweet 16 is down 3% YTD.

As a group, the Sweet 16 closed 47.2% below my Fair Value Estimates on Friday. Look at Tab 2 of the spreadsheet to see my individual company valuations. You can also find them at the bottom of the individual company forecast models.

WTI crude oil prices firmed up and $92/bbl has become a strong support level. If you look at a one year chart for WTI there is a very clear upward channel that has formed. The bottom is now $92 and the top is $100. Below $92 there are support levels at $90, $88 and very strong support at $84. My SWAG is that WTI will stay in this channel until spring arrives, then we might see a test of the support levels. If $88 holds then there is a good chance of WTI moving to $100/bbl by year-end. Of course, there are many things that impact oil prices. As long as the global economy hangs tough, so should oil prices.

Natural gas prices are being driven by the weather right now, but it is beginning to look a lot more that $4.00 will be a good average for this year. Industrial demand is picking.

For my valuations I use $90/bbl for WTI and $3.50/mcf for gas. I adjust for each company's regional differentials and their hedges in place.

Not being talked about much is that NGL prices are moving higher. NGL exports and more demand for propane is helping that market. More demand for NGLs is also a positive for dry natural gas prices. There are no laws against exporting NGLs or refined products and it has really picked up.

Gulfport Energy (GPOR) dipped under $53, but it has bounce back. If you don't own it, now would be a good time to add a position under $55. My valuation is $75.50/share. GPOR is set to have more than 300% production growth this year.

OAS and SM look like "Screaming Buys" at the current price. Both are now trading at less than 4X my 2014 CFPS forecast. That is ridiculous for companies of this quality. They both are going to have outstanding year-end reserve reports.

I will have more on the Sweet 16 in The View From Houston, which will be e-mailed to members on Monday.

4th quarter results won't be coming out until February, but we should see several operations updates before that. 4th quarter results for this group are going to be solid.