Sweet 16 Update - September 27
Posted: Sat Sep 27, 2014 1:04 pm
The Sweet 16 Growth Portfolio spreadsheet has been updated:
> Tab 1 of the spreadsheet is a summary of the EPS and CFPS forecasts for each company,
> Tab 2 shows our Fair Value Estimate compared to First Call's Price Target for each company as of 9-27-2014
Updated profiles and forecast models for each company are available under the Sweet 16 tab. Just log onto the website, click on the Sweet 16 Tab and click on the logo of the company you want to see.
Our Sweet 16 Growth Portfolio was down 3.26% last week, one of the worst week’s it has had in a long time. Year-to-date the Sweet 16 are up 15.65%, compared to the S&P 500 Index that is up 7.27% YTD.
First Call’s Target Prices for the group continue to drift higher. My combined Fair Value Estimate for the Sweet 16 is now 49.55% higher than the current share prices. SM Energy (SM) continues to be the company that I believe has the most upside for us.
> Unit Corp. (UNT) is hosting our luncheon in Houston on Tuesday, September 30. Larry Pinkston, the CEO should provide some valuable insights into what is happening in Oklahoma. I believe Central Oklahoma is going to become a much bigger story in 2015.
3rd quarter reported earnings for most of the Sweet 16 are going to top the current First Call EPS forecasts. “Reported Earnings” include mark-to-market adjustments on hedges. When commodity prices go down, the value of those hedges goes up. “Adjusted Earnings” are what will be compared to First Call’s estimates. I’ve gone over all 16 forecast models and it looks like their adjusted earnings will be very close to the current First Call EPS estimates.
My valuations are based on cash flows from operations. The Sweet 16 is now trading at less than 6X CFPS, which is very low for a group with this much production and proven reserve growth locked in.
Primarily because of better weather in the summer, most of the Sweet 16 are going to report very strong production growth in the 3rd quarter.
> Gulfport Energy (GPOR) should report close to a 50% increase in production from Q2. They tied in several high rate Utica Shale wells early in the quarter. The price they are getting for their NGL’s will be of the most interest to me.
> Oasis Petroleum (OAS) is expected to report a 4,500 boepd increase from Q2 to Q3. If the company reaffirms their guidance, the market's interest should perk up. OAS is down 9% YTD, which makes no sense to me. According to previous guidance, the company is on-track to report more than 40% increase in production this year and a big increase in their proven reserves at year-end.
> Sanchez Energy’s (SN) 3rd quarter results will be the first quarter that includes their recent acquisition from Shell. I am expecting close to an 18,000 boepd increase in production.
> Matador Resources (MTDR) is on-track for 40% production growth this year. They should exit 2014 near 22,000 boepd (45% crude oil).
> Newfield Exploration (NFX) will report a slight decrease in production due to non-core asset sales. Two things have the potential to move NFX a lot higher: (a) a positive update on their STACK play in Oklahoma and (b) the sale of assets offshore China. After the China sale, NFX should be a lot more appealing to Wall Street.
> If you don’t own Whiting Petroleum (WLL), I strongly urge you to read our profile. After they close the merger with Kodiak Oil & Gas (KOG), this core holding has the potential to become a “darling” of Wall Street. WLL closed Friday $46 below my valuation. First Call’s price target is $106.87 and I believe that will go up after the merger closes.
This group has been moving in lock step with crude oil prices. As we move into October, global demand for oil goes up. Strong 3rd quarter results should ease some of the concerns on Wall Street. Let's hope so.
> Tab 1 of the spreadsheet is a summary of the EPS and CFPS forecasts for each company,
> Tab 2 shows our Fair Value Estimate compared to First Call's Price Target for each company as of 9-27-2014
Updated profiles and forecast models for each company are available under the Sweet 16 tab. Just log onto the website, click on the Sweet 16 Tab and click on the logo of the company you want to see.
Our Sweet 16 Growth Portfolio was down 3.26% last week, one of the worst week’s it has had in a long time. Year-to-date the Sweet 16 are up 15.65%, compared to the S&P 500 Index that is up 7.27% YTD.
First Call’s Target Prices for the group continue to drift higher. My combined Fair Value Estimate for the Sweet 16 is now 49.55% higher than the current share prices. SM Energy (SM) continues to be the company that I believe has the most upside for us.
> Unit Corp. (UNT) is hosting our luncheon in Houston on Tuesday, September 30. Larry Pinkston, the CEO should provide some valuable insights into what is happening in Oklahoma. I believe Central Oklahoma is going to become a much bigger story in 2015.
3rd quarter reported earnings for most of the Sweet 16 are going to top the current First Call EPS forecasts. “Reported Earnings” include mark-to-market adjustments on hedges. When commodity prices go down, the value of those hedges goes up. “Adjusted Earnings” are what will be compared to First Call’s estimates. I’ve gone over all 16 forecast models and it looks like their adjusted earnings will be very close to the current First Call EPS estimates.
My valuations are based on cash flows from operations. The Sweet 16 is now trading at less than 6X CFPS, which is very low for a group with this much production and proven reserve growth locked in.
Primarily because of better weather in the summer, most of the Sweet 16 are going to report very strong production growth in the 3rd quarter.
> Gulfport Energy (GPOR) should report close to a 50% increase in production from Q2. They tied in several high rate Utica Shale wells early in the quarter. The price they are getting for their NGL’s will be of the most interest to me.
> Oasis Petroleum (OAS) is expected to report a 4,500 boepd increase from Q2 to Q3. If the company reaffirms their guidance, the market's interest should perk up. OAS is down 9% YTD, which makes no sense to me. According to previous guidance, the company is on-track to report more than 40% increase in production this year and a big increase in their proven reserves at year-end.
> Sanchez Energy’s (SN) 3rd quarter results will be the first quarter that includes their recent acquisition from Shell. I am expecting close to an 18,000 boepd increase in production.
> Matador Resources (MTDR) is on-track for 40% production growth this year. They should exit 2014 near 22,000 boepd (45% crude oil).
> Newfield Exploration (NFX) will report a slight decrease in production due to non-core asset sales. Two things have the potential to move NFX a lot higher: (a) a positive update on their STACK play in Oklahoma and (b) the sale of assets offshore China. After the China sale, NFX should be a lot more appealing to Wall Street.
> If you don’t own Whiting Petroleum (WLL), I strongly urge you to read our profile. After they close the merger with Kodiak Oil & Gas (KOG), this core holding has the potential to become a “darling” of Wall Street. WLL closed Friday $46 below my valuation. First Call’s price target is $106.87 and I believe that will go up after the merger closes.
This group has been moving in lock step with crude oil prices. As we move into October, global demand for oil goes up. Strong 3rd quarter results should ease some of the concerns on Wall Street. Let's hope so.