Energy Prospectus

I am still traveling today (12/10), so I will have a more detailed Sweet 16 Update on Sunday. It was a mixed week for the Sweet 16, but all three of the "gassers" (AR, GPOR and RRC) finished the week higher. GPOR moved up over 10%, because it has the most exposure to higher gas prices. My valuation is $45/share, so it has a lot more upside for us.

You can find my valuation for each company on the Sweet 16 spreadsheet, which can be viewed or downloaded from the EPG website.

My valuations assume that WTI averages $60.00/Bbl for 2017 and HH natural gas averages $3.00/MMBtu. I do adjust for regional price differentials and for each company's hedges.

The Sweet 16 increased by 0.22% last week and is now up 56.91% year-to-date.

The "Trump Rally" continues: The S&P 500 Index increased by 3.31% last week and is now up 10.55% YTD.

XEC, EOG and FANG are approaching my valuations, but still have a ways to go.

The Sweet 16 spreadsheet shows my valuation for each company compared to First Call's price targets. Just remember that my valuation is what I think the company's value per share is today and FC is where they think the stock will be trading 12 months from now. FC price targets are the average of many analysts' forecasts submitted to Reuters. There is a very wide range of price targets submitted to Reuters for most of the companies because each Wall Street firm has their own commodity price deck and multiples that they use to value a company.

AR, GPOR and SM are trading at more than 50% below my valuations. AR makes no sense because they have over 100% of their 2017 natural gas production hedged at very good prices, so it has very low commodity price risk. All three companies produce a lot of natural gas and NGLs and Wall Street is not as keen on gas prices as I am.