Sweet 16 Update - April 3

[dan_s]

Sorry for the delay in getting the Sweet 16 update posted this weekend. I was at the InvestFest Conference in San Antonio on Friday & Saturday.

The Sweet 16 was up 1.02% last week and it is now up 8.36% year-to-date, compared to the S&P 500 Index that is up 1.41% YTD.

The Sweet 16 is trading 33.7% below my Fair Value Estimate.

CLR and RRC are leading the pack this year. Both are up more than 30% YTD and I still think they are great BUYs are today's share prices. I spent a lot of time at InvestFest talking to Robert Rapier. We are both convinced that natural gas prices are going to firm up nicely over the 2nd half of this year, which makes RRC even more attractive. AR and GPOR are the other two "gassers" in the Sweet 16. Starting in June, we should see a steady increase in natural gas demand and there is no doubt that natural gas production is falling, primarily the decline in associated gas in the Eagle Ford and other oil shale plays. See: http://www.eia.gov/petroleum/drilling/#tabs-summary-2

XEC, FANG, PE and PXD are approaching my Fair Value Estimates. Rumors in Houston are that Exxon will be making a run at PXD. I suspect that CXO and EOG are also on Exxon's radar screen.

Laredo Petroleum (LPI) will be dropped from the Sweet 16 in April. I am going to focus on several large-caps that have on my radar screen for some time now. A couple of them are on Robert Rapier's top picks list. Laredo is in good shape this year, but the company does have a lot of debt for its size. I believe that will keep a lid on the share price, so I just want to move to a company with more potential for us.

The spreadsheet showing my valuation and First Call's Price Target for each company will be available on the EPG website this afternoon.

Sitting here waiting for my review are profiles on BCEI, ESTE, GST and LNREF. We will send them out via e-mail in a couple of days.

[mikelp]

Dan:

that EIA attachment had some very bullish data for natgas

approx 1% total gas production decline in just one month (March-April)
approx 3% gas production decline in Eagle Ford

ST weather forecasts are moving the NG futures here, but time is on the bulls side, as the supply/demand works to our benefit

thanks for posting that info

I'm guessing maybe you're thinking of adding EQT to the Sweet 16 to replace LPI, that would give us another nice Marcellus/Utica gasser

just a guess, you'll let us know

[dan_s]

Yes, I am going to replace LPI in the Sweet 16. Just not sure who the replacement will be. In addition to EQT, RSPP looks very good at the current share price. Sweet 16 is a "Growth" portfolio and RSPP has more than 20% production growth locked in for 2016.

RSPP is another Permian Basin company and today it looks a lot better than LPI to me. LPI's production will be flat year-over-year.