Sweet 16 Update - May 17

[dan_s]

My Sweet 16 Growth Portfolio spreadsheet has been updated and posted under the Sweet 16 Tab:
> Tab 1 of the spreadsheet is a summary of the EPS and CFPS forecasts for each company
> Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 5-17-2014

The Sweet 16 is all about GROWTH. All of these companies have double digit production growth locked in for 2014 and several more years.

I am currently cracking the whip on the interns to update profiles for all of the companies in the Sweet 16. I will be sending out updated profiles on BCEI, EOG, UNT and WLL later today. They all look great.

Since first quarter results came out, First Call Price Targets for all of the companies have moved higher, with the exception of Gulfport Energy (GPOR). This is a very good sign, indicating that other analysts are coming around to my valuations. GPOR took a hit because they have significantly lowered their production guidance for 2014. I lowered my Fair Value Estimate for GPOR by $7.00 to $77.00. First Call's adjusted price target is $75.48. IMO the selloff after their first quarter results was grossly overdone and I now think the stock is a oversold. A large hedge agreed and purchased a million shares this week. GPOR may spend a few months in the Wall Street "penalty box", but I think it will be a lot higher by year-end. GPOR's production will be up ~250% this year.

Bonanza Creek (BCEI), like many companies, had some weather related production issues in Q1. They are back on-track to ~45% production growth this year. First quarter production was 19,700 boepd and I expect them to exit this year over 28,000 boepd. BCEI has a ton of upside for us. Their downspacing program is generating some excellent results, which should significantly increase their recoverable reserves per acre.

Whiting Petroleum (WLL) is now my Top Pick in the Bakken / Three Forks play, with Oasis Petroleum (OAS) right behind them.

I believe crude oil prices will move higher into year-end. Global demand for oil will be much higher in the second half of this year. As I pointed out at our Dallas luncheon on Thursday, WTI crude oil prices are locked into an upward channel that has been in place for over 22 months. This is a VERY STRONG technical pattern. Unless there is global recession, WTI is on-track to trade over $110/bbl by year-end. The IEA recently increased their global crude oil demand forecast. Read this: http://www.platts.com/latest-news/oil/l ... y-26789113

Unit Corp (UNT) and Range Resources (RRC) give you the most exposure to natural gas. UNT really looks good to me. Read the updated profile carefully. I will be sending it out this weekend.

[dan_s]

I have now updated all of the Sweet 16 individual company forecast models. My current production forecast for each company can be found at the bottom of each forecast spreadsheet. My current forecasts are only available to EPG members. You must log onto the website, click on the Sweet 16 Tab and then click on the company logo for the one you want to see.

How I calculate "Fair Value Estimate" (FVE) for each stock is shown at the bottom of the individual company forecast models. The cash flow multiple I use is based on a combination of (a) growth potential, (b) liquidity / balance sheet strength, (c) production mix, and (d) my 30+ years evaluating companies in this sector. My FVE is what I think the company's break-up or takeover value is today.

Most of my valuations are higher than the First Call Price Targets. RRC is the only one that is lower because I am still using a rather low natural gas price in my forecast models. RRC has HUGE 3P reserves, so my valuation will go up a lot if natural gas prices drift higher (which I think they will). RRC holds over a million acreages in the Marcellus/Utica Shale. It is one of the most valuable pieces of real estate on this planet.

Forecast models for the Small-Cap Growth Portfolio companies are under the Watch List Tab.
Forecast models for MLPs are under the MLP Tab.

[dan_s]

Update profiles and forecast models have been posted under the Sweet 16 Tab for Bonanza Creek Energy (BCEI), EOG Resources (EOG), Unit Corp. (UNT) and Whiting Petroleum (WLL).