Energy Prospectus

Prior to quarterly results a lot of analysts take a hard look at their forecast/valuation models (so do I). Today several of the Sweet 16 were mentioned in analysts reports.

Antero Resources (AR)
Upgraded by Jefferies from Underpreform to Hold
Upgraded by Seaport Global from Neutral to Buy

KLR Group changed their ratings on four of the Sweet 16:
PXD: Upgraded from Accumulate to Buy
CRZO: Upgraded from Accumulate to Buy
CLR: Downgraded from Buy to Accumulate
DVN: Downgraded from Buy to Accumulate

KLR Group also upgrade two of our Small-Cap Growth Portfolio companies:
SN: Upgrade 2 levels from Hold to Buy < I think SN is a "Screaming Buy" at today's share price because of they have 100% of this year's oil production hedged and good prices AND 2/3s of their production is natural gas and NGLs, which I believe will see much higher prices later this year.
SYRG: Upgraded from Accumulate to Buy

Why do you think Dvn was downgraded?

I cannot read the minds of other analysts. Devon completed their non-core asset sales and raised more money than the high end of their guidance. After all of the deals are closed in Q3 the company will have a strong balance sheet and arguably the best leasehold position in Stack.

Devon is a company "in transition", so it is a bit confusing to forecast at this point. IMO many Wall Street analysts are lazy and do not want to put in the extra work required to adjust their models for large transactions, so they will reduce a company to "Hold" or "Accumulate" until the smoke clears, then turn around and raise it to a BUY.

In addition to fantastic well results in Stack, a plus that I see on the horizon for Devon is that they produce a lot of NGLs. You can find their production mix at the bottom of my forecast model (under the Sweet 16 tab on the EPG website). NGL prices were hammered the last few quarters, but I think they are making a comeback. For example, in 2014 Devon sold NGLs for $25.07/bbl. In Q1 2016, Devon sold their NGLs for $6.84/bbl. A rebound to just $15.00/bbl for NGLS would raise Devon's cash flow from operations in 2017 by $250 million.