I’ve really been enjoying the Elliott Gue teaser ads lately, his copywriters have been throwing out some good stories about conspiracies and backroom deals — my favorite recent one was when he was telling us that he thought the Rockefellers would take over a certain deepwater drilling company a few months ago, and today’s ad is along the same lines: another famous oil family working behind the scenes to make you rich (if you’re smart and follow Mr. Gue’s ideas, of course).
If you like this kind of sales pitch, by the way, it’s clear that Gue and his fellow KCI editor Yiannis Mostrous are sharing ideas (or at least copywriters), because Mostrous was recently pitching an African bank using the same theme (in that case, following a different uber-wealth family, the Rothschilds — that article was in the Irregulars-only Friday File last month, you can see it here if you’re a paid member with your password).
But how about this one? It caught my eye not just because it’s a good story … but because it’s another Bakken/Williston teaser, and I haven’t looked at one of those in ages.
So what’s the promise from Gue?
“This is probably the most significant financial event of your lifetime….
“You may have missed Southwestern Energy rocketing from $0.82 to $47. You may even have missed Paladin Resources gapping 2,386% higher in 24 months. But you’re NOT going to miss this one!”
Woohoo! OK, got my attention. How about some details?
Gue starts out with the story of Spindletop, the famed blowout oil well in Texas that gave birth to Texas oil culture and, depending on how much you want to extrapolate, the century of the automobile and 100 years of cheap US oil. But he says that the Bakken formation is going to be “bigger than Spindletop. Heck, this is bigger than all of Texas!”
You’ve probably heard of the Bakken Formation, the Williston Basin (in which the Bakken rests) and the Three Forks/Sanish Formation below the Bakken — all part of a huge oil field in and near North Dakota. Here’s how Gue describes it:
“The Bakken Formation is a West Virginia-size oil deposit in the Williston Basin, a geological formation underlying much of North Dakota, eastern Montana, northwestern South Dakota and southern Saskatchewan and Manitoba, Canada.
“To put this into perspective, the Bakken oil reserves are 5 times the total proven reserves of Chevron, Gazprom, Exxon Mobil and ConocoPhillips combined, and twice the size of Saudi Arabia’s Ghawar oil super-field.
“The Energy Information Administration (EIA) recently published a report which stated, ‘A study provides estimates ranging up to 503 billion barrels of potential resources in place.’
“Independent analysis from the RAND Corporation says there are hundreds of billions of barrels of recoverable oil in the Bakken.”
And the Bakken oil rush has not escaped the attention of investors, of course — I’ve written about probably a dozen picks in the area that have been teased by as many newsletters over the years, and while most of them have been extraordinarily volatile, particularly when oil was making it’s run to $140 and then back to $35 just a couple years ago, many have also been excellent investments … or at least, excellent trades for those who follow the Bakken news and well results closely.
So which particular Bakken stock is Gue teasing? I don’t believe he’s actively teased a Bakken/Williston oil stock for us in the couple years I’ve been following his ads, though I may have missed one, so I’ll be curious to see which of these explorers of the northern prairies got him interested. Here’s what we get by way of clues:
“Operating in stealth mode, one under-the-radar wildcatter has seized control of over 453,000 leasehold acres within the oil-rich Williston Basin of North Dakota and Montana.
“The little independent is successfully leveraging advanced drilling and completion technologies: horizontal drilling, multi-stage isolated fracture stimulations and 3-D seismic imaging.
“And the company has drilled over 50 wells this year in its Williston Basin acreage. And that number is expected to quadruple.
“As the half-witted brokers and bankers on Wall Street put two and two together in the next 6 months, my top-secret recommendation is going to explode!
“And that’s not the half of it…
“It turns out this little-known wildcatter is secretly backed and controlled by the Hunt oil dynasty in Texas!”
We get a little bit more about that “secret” Hunt connection, including this:
“In fact, the president of the privately held Hunt Oil Company has quietly taken a seat on this little-known wildcatter’s Board of Directors now!
“If history is any guide, when the Hunt clan gets behind a small oil exploration company, you can bet it won’t be long before its stock starts gapping higher on the charts.”
And one last taste of the dazzling potential returns to keep us interested:
“I would conservatively estimate that investors who recognize this opportunity and react could easily run $10,000 up into $400,000 on one monster trade!
“It’s important that you seize the Bakken oil investment opportunity right now because the price of light, sweet crude is going to $246 a barrel in 2011.”
Gue goes on to say that not only does he see crude oil going to $246/barrel next year, but we’re entering a “new global paradigm” for oil prices and he implies that he thinks $1,000/barrel oil is possible in 2012. If that’s the case, of course, then you can throw a dart at pretty much any oil company with reserves and you’d probably do very well — but Gue has singled this one out, so let’s figure out who it is.
Ah, yes — the Thinkolator is quick to spit out results today: This Bakken company is none other than Brigham Exploration (BEXP), which I’ve covered a couple times in recent years. This one came up most recently in a teaser over the Summer, when the shares were around $16 or so, so the folks who jumped on that Oxford Club teaser are probably pretty happy now with BEXP at all-time highs around $27, as are those who followed the various iterations of a similar tease by the $12 Trillion Report.
Brigham Exploration has been focusing all of their attention on acquiring acreage in the Williston Basin and on improving their seismic imaging, fracking technology, and drillign techniques to try to improve results — and they’ve certainly done very well lately, particularly in the Rough Rider area. While it’s true that the Bakken is a potentially massive resource, it’s also true that it’s very drilling intensive — you have to be expert at the horizontal drilling and hydraulic fracturing, and you have to not only wring every bit of production out of successful wells but also keep getting it right because these wells tend to decline in production very quickly. There’s no sitting back and watching production after you’ve drilled a well, as you could have in the Spindletop days, the oil is there and is of high quality, but it’s intensive work to find and extract it.
The details of Brigham match the teaser almost perfectly — though the 453,000 acres is their gross number, the net leasehold is 282,584 acres in the Williston. And they do have a Hunt connection on the board, Hunt Oil Co. President Steven Hurley has been on Brigham’s board since 2002. Brigham is giving an investor presentation today at an energy conference, so you can see their updated investor slideshow here [pdf file] if you’re interested. They should continue to grow next year, not least because they’re upping their rig count from 6 to 8 so they can accelerate their drilling schedule, and they have been getting results that appear to this layperson to be very impressive, including one recent well that set a production rate record for the region at over 5,000 barrels/day (though that rate still declined quickly, as do all the wells in this oil shale).
That said, they’re also pretty well known as a Bakken play now and they’re fairly large with a $3 billion market cap, investors are certainly aware of their proven performance, and they’ve bid up the shares accordingly. BEXP is trading for about 50X their expected full year 2010 earnings, and about 30X 2011’S expected earnings … but you can certainly argue that these valuations are reasonable for a stock with expected annual growth in the 40%+ range. I would personally have a hard time buying a stock that had just surged quickly like this one has over the last month or two, but that’s a personal weakness and not necessarily an indictment of BEXP — I just tend to be more attracted to the ugly ducklings and nervous about momentum growth picks.
There are dozens of other stocks in the Bakken area, including larger players like EOG Resources (EOG), Marathon Oil (MRO), and Continental Resources (CLR), and smaller firms like Northern Oil and Gas (NOG) and Painted Pony Petroleum (PDPYF), and those are just a few of the examples I’ve seen recommended or teased over the years — I know that many of my readers have been active investors in this idea for at least two or three years, so if you’re in touch with the Williston vibe and want to share your thoughts, please feel free to do so with a comment below.
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