Southwestern Energy (SWN) being added to the Sweet 16

[dan_s]

After the close on September 30, Parsley Energy (PE) and Southwestern Energy (SWN) will be added to the Sweet 16.

I have decided to drop Baytex (BTE) and Bonanza Creek (BCEI). They are both solid companies that are trading way below my valuation. However, Baytex's production will drop from 84,812 boepd in Q2 to less than 80,000 boepd by year-end. Bonanza Creek's big selloff makes no sense to me at all. First Call's Price Target is $17/share (compared to my Fair Value Estimate of $17.70) and it closed on Friday at $4.38. Based on my forecast model, which is in-line with First Call's numbers, BCEI's operating cash flow per share in 2015 should be near $4.00/share.

E&P companies should only trade under 2X CFPS if there is a serious short-term issue and I see nothing like that for Bonanza Creek.

I will probably move BCEI back to our Small-Cap Growth Portfolio.
> The balance sheet looks fine.
> At 6/30/2015 they had $500 million of liquidity (compare to their $420 million capex budget).
> YOY production growth s/b over 20%

For now, I am leaving Oasis Petroleum (OAS) in the Sweet 16. I am looking for a replacement, but have not found one yet.

[dan_s]

The profile for SWN is now available on the EPG website.