Sweet 16 Update - Jan 26

[dan_s]

Last week was mixed for the Sweet 16. Overall the portfolio was flat on the week despite the big market selloff on Friday. Obviously, higher oil, ngl and natural gas prices help the fundamentals of all the companies in the Sweet 16. Natural gas over $5.00/mcf and this week's weather forecast should get a few fund managers to take a look at energy stocks.

The cold will also burn up a lot of home heating oil in the east.

Gulfport Energy (GPOR) is still down 9.7% YTD but it made a bit of a comeback last week gaining almost $4.50 per share before giving a third of it back on Friday. GPOR is getting a major boost from increasing NGL prices. Bitter cold in Ohio may slow down well completions a bit but that should not impact my forecast.

Gran Tierra (GTE) reported a major 2P reserve addition in Peru last week. If you are not familiar with this Calgary based company, you definitely need to get up to speed. Read our 11-27-2013 profile, which you can find under the Sweet 16 Tab. Just click on their logo (after you log in of course). I reported in our profile that the discovery well in Peru was a really big deal for this company. IMO GTE is now a MAJOR Takeover Target for several majors.

Range Resources (RRC) and Unit Corp. (UNT) are the two companies that have the most exposure to natural gas prices, so it is no wonder that they moved higher on the back of increasing Ngas prices last week. This coming week's weather should draw the attention of even more investors wanting to play in this space.

Others that have a lot of exposure to natural gas and NGLs are XEC, EOG, GPOR and SM Energy (SM), which is one of my top picks for 2014. My Fair Value Estimate for SM is $150/share. The company is on-track to generate over $22/share in cash flow in 2014. This company deserves a much higher multiple than 4X CFPS. Their primary focus is on the Eagle Ford Shale where rapidly increasing NGL prices are really going to help their income statement.

Bitter cold is moving into the northern plains this week. Although they are set up to handle cold in North Dakota there could be some impact on first quarter production. It will definitely delay some well completions. Extremely cold air is moving into the Chicago area on Tuesday. It will be the coldest air to hit the Great Lakes and Ohio Valley in decades. Actual air temps in Chicago could fall below -30 on Tuesday night. See link below.
http://www.wunderground.com/ndfdimage/v ... mint&msg=2

For more on the weather watch the video at the link below.
http://www.weatherbell.com/saturday-sum ... ry-25-2014