Sweet 16 Update - June 7
Posted: Sun Jun 07, 2015 2:22 pm
The Sweet 16 was up 0.30% last week and is now up 15.73% YTD, compared to the S&P 500 Index that is up just 1.65% YTD.
Crude oil prices did not react much to the OPEC meeting, primarily because nothing much changed. IMO Saudi Arabia does not want to ease the pressure on Russia and Iran, so they are OK with loosing money day-after-day. There will be significant tightening of the oil market during the 3rd quarter. The number of rigs drilling for oil in the United States continues to fall (from 1,609 in early October, to 642 on June 5). There is NO CHANCE the U.S. can maintain production over 9 million bbls per day with so few rigs drilling for oil.
Keep in mind that well completions did not start to decline until the 2nd quarter, so U.S. production will peak in Q2 and decline will begin in Q3. The rate of decline will accelerate in Q4 and our production will continue to decline until upstream companies significantly increase drilling activity. I doubt we see any increase in U.S. drilling activity until WTI moves over $70/bbl.
For most of the Sweet 16, First Call's Price Targets continue to drift toward my valuations. You can find my FVE and FC price targets for each company on the Sweet 16 Spreadsheet.
BCEI, NFX and SM look like the best values right now. Now is a good time to build positions in the Elite Eight. EOG will not stay this low for much longer.
The Permian Basin companies have done the best as a group.
All of the Sweet 16 profiles and forecast models are now up-to-date. You can find them all on the EPG website.
My attention will now turn to the companies in our other model portfolios. During June, we will publish updated profiles on most of the companies in our Small-Cap and High Yield profiles and new reports on a few companies I've had on my radar screen.
Crude oil prices did not react much to the OPEC meeting, primarily because nothing much changed. IMO Saudi Arabia does not want to ease the pressure on Russia and Iran, so they are OK with loosing money day-after-day. There will be significant tightening of the oil market during the 3rd quarter. The number of rigs drilling for oil in the United States continues to fall (from 1,609 in early October, to 642 on June 5). There is NO CHANCE the U.S. can maintain production over 9 million bbls per day with so few rigs drilling for oil.
Keep in mind that well completions did not start to decline until the 2nd quarter, so U.S. production will peak in Q2 and decline will begin in Q3. The rate of decline will accelerate in Q4 and our production will continue to decline until upstream companies significantly increase drilling activity. I doubt we see any increase in U.S. drilling activity until WTI moves over $70/bbl.
For most of the Sweet 16, First Call's Price Targets continue to drift toward my valuations. You can find my FVE and FC price targets for each company on the Sweet 16 Spreadsheet.
BCEI, NFX and SM look like the best values right now. Now is a good time to build positions in the Elite Eight. EOG will not stay this low for much longer.
The Permian Basin companies have done the best as a group.
All of the Sweet 16 profiles and forecast models are now up-to-date. You can find them all on the EPG website.
My attention will now turn to the companies in our other model portfolios. During June, we will publish updated profiles on most of the companies in our Small-Cap and High Yield profiles and new reports on a few companies I've had on my radar screen.