Energy Prospectus

We just got back from the EPG cruise, which was fantastic! Susan is already making plans for the next one.

I am going over the Sweet 16 right now and I will have some comments this evening. It looks like they held up well last week. I see that the First Call Price Targets have been raised for many of the Sweet 16 stock.

I am updating the SN forecast model and I will have it posted soon.

An updated Sweet 16 spreadsheet has been posted under the Sweet 16 Tab.

> Tab 1 is a summary of my EPS and CFPS forecasts,
> Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 3-8-2014

Not a lot of changes this week, but First Call's price targets continue to move toward my Fair Value estimates.

The Sweet 16 is now up 7.5% YTD. All of the stocks are trading below my Fair Value Estimates (FVE), so they are all "BUYs" in my opinion. SM Energy (SM) remains a "Screaming Buy" as it is trading at half my FVE.

One thing that caught my eye in Sunday's paper is that the active onshore rig count is up near 1,800. It has not been that high in quite awhile. This could be a big year for the onshore drillers if this trend continues.

Matador Resources (MTDR) will release Q4 results this week. I will update my forecast soon after they release. I have high hopes for this one.

The land drillers are up ~20%. What next? Where is the funding for new drilling coming from?

Bob

I follow a lot of E&P companies and most are adding more rigs. The money is coming from $100/bbl oil. The ROR on the major shale plays is fantastic. IMO it will take $7.00/mcf gas before we see a significant increase in gas directed drilling. It will come in a couple years.

Drilling outside the U.S. is also picking up.
"Drilling for oil and gas deposits outside North America has hit the highest level in three decades, led by big exploration and production programmes in the Middle East and Africa. More than 1,300 drilling rigs have been operating on average over the last six months, the greatest number since 1983, according to oilfield services company Baker Hughes. The number of rigs is up 20 percent compared with 2008 and has more than doubled since hitting a nadir in 1999. The boom is being led by the Middle East, where the number of rigs operating has tripled since 1999, and Africa, where the rig count is up almost four times. Rig counts reported by Baker Hughes do not include onshore China, Russia, the Caspian and certain other countries."

Despite a massive amount of capital being spend to find new oil supplies it will be very difficult to keep pace with demand. The world is now "short oil", which is what is keeping crude oil prices so high. - Dan