MTDR, JONE and SN

[dan_s]

Three of our Small-Cap Growth Portfolio companies are recommended in this article.

http://finance.yahoo.com/news/5-slumpin ... 07665.html

I am finishing up a profile on Jones Energy (JONE) today. This stock is trading an unbelievably low multiple of operating cash flow per share.

Here are the First Call operating CFPS forecasts and my forecasts are higher.

2016 = $1.73 CFPS
2017 = $1.45 CFPS

It is obvious to me from looking at the First Call numbers that many analysts have not factored in any growth from the company's recent SCOOP/STACK acquisition. Since the company has not provided any production guidance for 2017, I am only assuming 5% YOY production growth in 2017.

My valuation of JONE is $8.90/share, compared to First Call's price target of $6.44.

As I pointed out in this weeks podcast, these small-caps have a lot more RISK than the companies in our Sweet 16. Just consider your own "Risk Tolerance" when investing in small-caps.

[dan_s]

I subscribe to Keith Kohl's "The Energy Investor" newsletter. Keith rates MTDR as his #1 pick for 2017 with a current valuation of $30, which is the same as my valuation.

Keith agrees with me that MTDR has a lot more upside for us. We just need to see their Q4 results and production guidance for 2017.

Matador's production grew 55% YOY in 2015 and another 12% YOY in 2016.

If you'd like to subscribe to Keith's newsletter, send an e-mail to customerservice@angelpub.com I do not agree with a lot of Keith's picks, but it is nice to see another point of view. He rates REI and FANG as HOLDs and he rates OKS a BUY with a price target of $58.

[k1f]

Sanchez has bought turf from Anadarko and apparently the mkt love it, since SN has spiked by 2.50 or more:

http://finance.yahoo.com/m/b42755dd-bc2 ... -ford.html

SPP has received a tickle in the process.

[dan_s]

I just got home from my Friday afternoon workout and I was thinking on the way home that this deal by SN should make SPP look a heck of a lot better. The midstream MLPs that spin out of upstream companies are very dependent on production growth from the parent company.

SN new partner, Blackstone has very deep pockets and will want to aggressively develop what they buy from Anadarko.

[dig4value]

Hi Dan,
Re: SPP with respect to the new SN acquisition, etc.
I have reviewed your latest forecast for SPP for 2017 and 2018. With the kind of DCF $2.80+ for 2017 and distribution of $1.72. I anticipate a continued gradual increase in SPP's distribution from 43.1c/qtr to perhaps 45c/qtr by year end 2017. I recently sold all my SPP the day before ex-div anticipating a drop... but did not expect it to drop down into the lower 12s. SO Bought a ton in the mid to lower 12s on Friday. SN was only off a little but SPP was hit hard. I see no real reason for this. I would say that the distribution is safe and at current SPP prices the yld is almost 14%! Trying to get your read on SPP/SN. Mine is that if SN executes OK and energy prices stay in their current range, SPP will do great. Am I missing something or was there just some nervous folks selling SPP over the last few days.

Thanks,
dig4value

[dan_s]

My top priority is updating the Sweet 16 forecast/valuation models, but I will update SN on Monday just for you.

SN and MTDR are candidates for promotion to the Sweet 16.

JONE looks super cheap, but I want to see some well results in SCOOP/STACK from them.