Sweet 16 Update - October 22
Posted: Sat Oct 22, 2016 11:37 am
It was a "sideways week" for the Sweet 16 as a group was down 0.25% with half the stocks up and half of them down slightly. For the year, the Sweet 16 is up 49.06%, compared to the S&P 500 Index that is up just 4.76%.
3rd quarter results start coming out next week, with Antero Resources (AR) and Range Resources (RRC) the first two companies to report. They are two of the three "gassers" in the portfolio, so their comments on the tightening natural gas and NGL markets should be helpful. The December NYMEX contract becomes the front month late in October. It closed at $3.33/MMBtu on Friday. The front month NYMEX contracts are the oil & gas prices you see quoted in the business news each day. I think there is a good chance the December Ngas contract moves over $3.50 by the end of November. Wall Street will focus on the gassers when the first cold wave moves through the Great Lakes region. The current forecast is for this to happen the week of Thanksgiving.
Gulfport Energy (GPOR) pulled back after reporting a strong increase in production from 110,790 Boepd in Q2 to 122,354 Boepd in Q3. The reason the stock price pulled back was because they announced rather low realized prices for their production in Q3. Obviously, commodity prices will be higher in the 4th quarter and so will their production. Gulfport is ramping up completions and should exit 2016 with production of approximately 135,000 Boepd and heading to 150,000 Boepd in 2017. 3rd quarter production mix was 86% natural gas, 9% NGLs and 5% crude oil. My valuation is $45/share.
RSP Permian (RSPP), the newest member of the Sweet 16, announced a "Game Changing" $2Billion acquisition this month. My valuation is $47.00, compared to First Call's price target of $49.03. It takes awhile for the smoke to clear on an acquisition of this size, but RSPP is definitely gearing up to become a MAJOR Permian Basin company. Add this one on the dips if you do not have it in your portfolio.
EOG Resources (EOG) is the largest company in the Sweet 16. If oil goes to $60/Bbl, this stock will go a lot higher because it has an outstanding technical team that is getting some of the best well results in the Permian Basin and the Eagle Ford. Plus, they have some of the lowest completed well costs. EOG is a "CORE HOLDING" quality company and should be in your portfolio.
The price of oil would be higher today if not for the strengthening of the U.S. dollar. Oil trades all over the world in U.S. dollars, so when the dollar goes up it pressures oil prices. See the U.S. dollar index here: http://www.marketwatch.com/investing/index/dxy/charts
Wall Street is in love with the Permian Basin because of the stacked pay zones and the best well level economics. 38% of the active rigs in the U.S. are working in the Permian Basin. Pure plays on the Permian are CXO, FANG, PE, RSPP and PXD. XEC, EOG, PDCE and SM also have core areas in the Permian.
SCOOP & STACK are right behind the Permian. CLR, DVN, NFX and XEC are my top picks in Central Oklahoma. Devon Energy (DVN) has completed non-core asset sales for $3.2 Billion, so it can focus on STACK. For those of you that own Gastar (GST), you need to read carefully what MRO and NFX say about their STACK results. They have the most wells near Gastar's leasehold.
Download the Sweet 16 spreadsheet to see my valuations for each stock compared to First Call's prices targets. First Call's prices targets have been increased for all sixteen companies this month.
I will be sending out updated profiles on Synergy Resources (SYRG) and Emerge Energy Services LP (EMES) early next week. If oil does go to $60/Bbl there is going to be a BIG INCREASE in demand for frac sand in 2017. It now looks like frac sand demand will be higher than it was in 2014 because upstream companies are using a lot more sand per well. Go look at the charts for EMES, HCLP, FMSA and SLCA. These are the four major suppliers of frac sand to the industry. My favorite is HCLP because they are the low cost producer of northern white sand.
I will open Wednesday's luncheon in Houston with an update on the oil & gas markets. Rob Capps, CEO of Mitcham Industries (MIND) will update us on the global exploration activity.
3rd quarter results start coming out next week, with Antero Resources (AR) and Range Resources (RRC) the first two companies to report. They are two of the three "gassers" in the portfolio, so their comments on the tightening natural gas and NGL markets should be helpful. The December NYMEX contract becomes the front month late in October. It closed at $3.33/MMBtu on Friday. The front month NYMEX contracts are the oil & gas prices you see quoted in the business news each day. I think there is a good chance the December Ngas contract moves over $3.50 by the end of November. Wall Street will focus on the gassers when the first cold wave moves through the Great Lakes region. The current forecast is for this to happen the week of Thanksgiving.
Gulfport Energy (GPOR) pulled back after reporting a strong increase in production from 110,790 Boepd in Q2 to 122,354 Boepd in Q3. The reason the stock price pulled back was because they announced rather low realized prices for their production in Q3. Obviously, commodity prices will be higher in the 4th quarter and so will their production. Gulfport is ramping up completions and should exit 2016 with production of approximately 135,000 Boepd and heading to 150,000 Boepd in 2017. 3rd quarter production mix was 86% natural gas, 9% NGLs and 5% crude oil. My valuation is $45/share.
RSP Permian (RSPP), the newest member of the Sweet 16, announced a "Game Changing" $2Billion acquisition this month. My valuation is $47.00, compared to First Call's price target of $49.03. It takes awhile for the smoke to clear on an acquisition of this size, but RSPP is definitely gearing up to become a MAJOR Permian Basin company. Add this one on the dips if you do not have it in your portfolio.
EOG Resources (EOG) is the largest company in the Sweet 16. If oil goes to $60/Bbl, this stock will go a lot higher because it has an outstanding technical team that is getting some of the best well results in the Permian Basin and the Eagle Ford. Plus, they have some of the lowest completed well costs. EOG is a "CORE HOLDING" quality company and should be in your portfolio.
The price of oil would be higher today if not for the strengthening of the U.S. dollar. Oil trades all over the world in U.S. dollars, so when the dollar goes up it pressures oil prices. See the U.S. dollar index here: http://www.marketwatch.com/investing/index/dxy/charts
Wall Street is in love with the Permian Basin because of the stacked pay zones and the best well level economics. 38% of the active rigs in the U.S. are working in the Permian Basin. Pure plays on the Permian are CXO, FANG, PE, RSPP and PXD. XEC, EOG, PDCE and SM also have core areas in the Permian.
SCOOP & STACK are right behind the Permian. CLR, DVN, NFX and XEC are my top picks in Central Oklahoma. Devon Energy (DVN) has completed non-core asset sales for $3.2 Billion, so it can focus on STACK. For those of you that own Gastar (GST), you need to read carefully what MRO and NFX say about their STACK results. They have the most wells near Gastar's leasehold.
Download the Sweet 16 spreadsheet to see my valuations for each stock compared to First Call's prices targets. First Call's prices targets have been increased for all sixteen companies this month.
I will be sending out updated profiles on Synergy Resources (SYRG) and Emerge Energy Services LP (EMES) early next week. If oil does go to $60/Bbl there is going to be a BIG INCREASE in demand for frac sand in 2017. It now looks like frac sand demand will be higher than it was in 2014 because upstream companies are using a lot more sand per well. Go look at the charts for EMES, HCLP, FMSA and SLCA. These are the four major suppliers of frac sand to the industry. My favorite is HCLP because they are the low cost producer of northern white sand.
I will open Wednesday's luncheon in Houston with an update on the oil & gas markets. Rob Capps, CEO of Mitcham Industries (MIND) will update us on the global exploration activity.