The Rest of those “Three Bakken Stocks Below $10”

by Travis Johnson, Stock Gumshoe | November 16, 2011 3:41 pm

New Bakken buys teased by Keith Kohl for the $20 Trillion Report

After yesterday’s brief interlude to dig into the “goldmine of the future,” today we’re back on track with the “Bakken[1] stocks below $10 to buy right now” teaser.

We identified the first pick on Monday — that was Triangle Petroleum, in case you missed it, and you can see that article and the follow-up comments here[2] — so today we’ve got two stocks to undearth in part two of our sleuthification.

The basic idea, in case you’re just joining us, is that Keith Kohl[3] and the folks at the $20 Trillion Report[4] claim they picked some awesome stocks at the beginning of the first Bakken boom in 2008/2009 (they’re at least partly right, based on the info I have), and they believe they’ve identified the next crop of huge winners now. Which they’ll tell you about, for $99.

Here at Stock Gumshoe, we’d rather learn the facts first — maybe you want to subscribe to a newsletter, sure, but don’t cave in to the marketers and make an expensive commitment in a hyper rush just to discover a top-secret name. We’ll sift through their hints and clues, identify the picks for you, then you can make a patient and sober decision about which newsletters you want to pay for their guidance. (And yes, sometimes “none” is a perfectly reasonable choice.)

So the Gumshoe mission continues — what clues are we given about our other little Bakken players?

“One stock trades for just $7.60 a share.

“They control over 110,000 acres in the Bakken — and they just announced a monster third quarter… Their reported net income skyrocketed 3,200% compared to a year ago!

“It gets better: They just completed four new wells, and I think sales and net profit will rise in the coming quarters.

“This stock is poised to take off to the races (assuming it doesn’t get acquired first at a huge premium.)

“My second Bakken stock trades for less than $2.50 a share!

“This stock is cheap. It has $54 million in cash in the bank… and zero debt. It’ll control over 90,000 acres in the Bakken.

“This baby could easily double in a year.”

So that’s about all we get — the ad gets a little confusing as they run through all the fabulous performance they expect from their Bakken stocks, but essentially all of the other clues in the teaser ad were about the “$6 stock,” which was stock number three, the one we wrote about yesterday[5] that he thinks will go up 153%.

But limited clues or not, let’s see what we can find.

Best guess for that first one is Kodiak Oil & Gas (KOG), which until recently did have 110,000 gross acres in the Williston Basin — they finished one acquisition in October and announced a much larger one just yesterday, so that’s changing fast. They did just complete four net new wells as of the last production udpate, and the price was around $7.60 a few days ago (it’s a touch over $8 now, thanks to volatility surrounding earnings and their big news).

Why a “guess” this time? Because while the teaser says they reported a 3,200% increase in net profit (or earnings) in the last quarter — I can’t match that to the facts. They reported their third quarter and this big new acquisition on Monday, after the teaser ad had been running for at least a few days, and the second quarter numbers didn’t pop up with anything like 3,200% profit increases. Yes, they’re increasing revenue and profits by several hundred percent lately, both in the second and the third quarters, but not by thousands of percent. So perhaps there’s another bakken stock out there at a similar price with a similar acreage number, if this is a wrong guess I’d like to hear the right one — I rarely publish with a guess, but thought it was worth pointing you to KOG to take a look, so we’ll make an exception here.

Kodiak is one of many aggressive Bakken players who are spending a lot more on their capital budgets than they bring in, so it doesn’t take much of a hiccup (or dry well) to disappoint investors and make their numbers look worse — but if you assume that they’ll continue to mostly have good drilling results and that oil[6] prices will remain elevated, they’re certainly more leveraged to increased Bakken production than are many other stocks. Their costs are high, with capital investment more than doubling next year, quite a lot of bank debt, and with significant dilution to fund their latest acquisition (though at least one pundit calls it a steal of a deal[7]).

With the general tendency of North Dakota Bakken drilling to get expensive with all the competition for land, people and equipment, those numbers could rise further for a company that’s positioning itself quite aggressively like Kodiak is. It looks like their costs per barrel of oil equivalent are now just over $50, in the last earnings report[8], so I’m sure they’re quite happy to see oil back to $100 a barrel today. That’s about all I know about Kodiak, so let me see if I can supply at least a guess on the other one for you …

The “second Bakken stock” under $10 must be: Samson[9] Oil & Gas (SSN). This is an Australian company, also listed in Australia at the same ticker, though all of their operations are in the US (they became a fully . The teaser is a little bit tricky because it says “it’ll control over 90,000 acres in the Bakken” … which might be true, but right now they control just over 20,000, and most of it hasn’t been very aggressively drilled or tested yet. The 90,000 acres is the total potential announced in their deal to acquire a large leaseholding on the Fort Peck Reservation[10] in Montana, which is prospective for Bakken oil. Their other Bakken holdings are in the actively producing North Stockyard field where they acquired a junior interest five years ago — that is a small acreage area, but it has produced quite a lot of oil from a half dozen wells. And their other interesting activity to this point has been in the Niobrara Shale, which is also an oft-teased up-and-coming shale area[11] that some folks have called the “neobakken” (though there are plenty of “next bakken” areas out there, if you listen to the stock touts).

So that’s another potential Bakken play for you, they did raise that cash not long ago so they seem to have have plenty of capital on hand for their near-term drilling needs, they are generating cash, particularly from their small North Dakota bakken holdings, and they are small so any flurry of attention could certainly move the shares, but that’s about all I know about Samson.

There you have it, then — two more Bakken stocks for you. Will they be as successful as Northern Oil and Gas and Brigham Exploration from the first wave of Bakken stock mania? Beats me, but if the Thinkolator ain’t on the fritz that seems to be what Keith Kohl thinks. If you’ve a favorite in the frozen prairies, let us know with a comment below. Thanks!

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