“Three Bakken Stocks Below $10 to Buy Right Now” (Part One)

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“I have three more unknown stocks in the Bakken that I believe will give you bigger returns than Brigham or Northern Oil & Gas.”

That’s the meaty bit of the latest pitch from Keith Kohl for his $20 Trillion Report — he tells us that he recommended a few Bakken stocks years ago, during the heady early days of the Bakken stampede, and he seems to think that the riches you would have seen from those stocks are about to be repeated.

He’s at least mostly telling the truth about the great past performance, by the way — I have no idea how his portfolio was managed or if he would have had you trade in or out of the stocks in the interim, but that newsletter did very actively tease shares in Brigham Exploration (BEXP) and Northern Oil and Gas (NOG) more than two years ago (and that teaser ad repeated many times — it was already pretty old by the time I wrote about it in the Fall of 2009). Those stocks, had you bought them when that article ran and held them, are up somewhere in the neighborhood of 250-300%, with Brigham Exploration (BEXP) in particular getting lots of attention thanks to their recent agreement to be bought out by the Norwegian state-controlled giant Statoil (STO). The third stock that was actively teased in those same ads was Enerplus (ERF), but it was never much of a “pure” Bakken play — other newsletters over the years have teased a handful of other very successful Bakken-related picks, including, among others, Painted Pony and Kodiak Oil and Gas.

So will lightning strike again? That’s the idea, at least. You’ve probably heard all about the Bakken as a general theme in oil investing — the Bakken play is in the Williston Basin of North Dakota (extending into Montana and Canada as well), and you’ll often also hear about the Sanish or the Three Forks fields, which are under the Bakken. All are shale oil, meaning that they’re extracted using horizontal drilling and fracking to break up the rock formations and release the oil (not too different from the shale gas techniques that are enriching folks who own land in the Marcellus and elsewhere, though they’ve found “too much” shale gas so prices have collapsed, the same problem hasn’t hit for shale oil, for a multitude of reasons).

The estimated resource base in the area is massive, and, with more information after a few years of more drilling and more exploration, is likely to be restated higher again. Kohl teases that the current estimate from the USGS that the Bakken and Three Forks hold at least 6.2 billion barrels of oil is likely to be bumped up considerably when they redo this analysis … which he says they’re doing now. Since the USGS estimate back in 2008 was part of what spurred increased interest in the Bakken among investors and speculators, the logic seems reasonable that an increased estimate could be a positive catalyst for companies that have big undeveloped Bakken land holdings (investors should be valuing the developed land holdings and active wells based on their actual production and reserves, one imagines, it’s the undeveloped stuff that should theoretically get more valuable as estimates of the reservoir size increase).

So what, then, are Kohl’s favorite picks in the Bakken now, the picks below $10 that he thinks you should “buy right now?” He gives hints about three picks and I will get to them all before this week ends, but we’re going to start at the ending since that’s the one he sounds most excited about … let’s check out our clues:

“My third and final Bakken stock might be the biggest blockbuster yet.

“It trades for just $6 a share… has a total of 74,000 acres in the Bakken… and the company’s insiders have been buying its stock like crazy in the open market. In fact, in the last six months, insiders have purchased 880,000 shares — with no selling whatsoever.

“I love this company.

“You see, even though it’s a small-cap oil company (it has a current market valuation of just $260 million), it has $110 million in cash and zero debt!”

This one, sez the mighty, mighty Thinkolator, is Triangle Petroleum (TPLM). And yes, they do have 74,000 acres (or maybe 72,000, there’s been some “recalculation”), the stock is in the $5.50 range, and there has been some “insider” buying — though the insiders weren’t actual executives, the big insider buys that give us that 880,000 share number were from Cambrian Capital Partners, a hedge fund that holds a substantial portion of the company (actual insiders have been getting lots of shares, to be sure, but they haven’t been paying for many of them on the open market).

And yes, they do have $110 million in cash and no debt, but that’s mostly because they raised $116 million just six months ago in a public offering — they’re not yet generating positive cash flow (thanks to a near-total absence of revenue until recently), though analysts think they will be profitable next year.

They are very much in the exploratory/development stage after engineering a refocusing of the company toward the Williston basin this year. Most of those 74,000 acres have been bought in the last several months, but they also own some non-operating participation in a couple dozen wells in the Bakken that are producing oil. The company did start drilling their first operated well last month and they have the permit in hand for their second well once the drilling rig is available to move on, and it’s these operated wells that they think will give them the potential to dramatically increase production and cash flow over the next year or so, particularly in what they’re calling the “Station Prospect” area.

I’m not a petroleum geology expert by any means, but this one does sound like an interesting early stage speculation even though one imagines that they’re probably, as late entrants, having to pay a pretty penny for this acreage. As a nice little twist to the story to keep you interested, they’ve also formed a pressure pumping subsidiary that might become a profitable sideline, potentially as a service provider to the smaller operators in the Bakken who may have trouble getting access to fracking crews and pumping equipment. May not lead to anything, but I like that they’re thinking aggressively about building a business.

Most of the junior explorers in the Bakken get quite a bit of investor attention, and Triangle, though newer than most to the region, is no different — there have been quite a few folks covering this one over at SeekingAlpha, for example, including one pretty detailed analysis and forecast here.

We’ll get to the other two Bakken picks probably tomorrow unless something even sexier comes rolling our way overnight — but don’t let us stop you, if you’ve a favorite Bakken pick to share or a thought on Triangle, feel free to shout it out now with a comment below … that’s what our friendly little comment box is for.

Oh, and if you’ve ever subscribed to the peak oil enthusiasts at the $20 Trillion Report, either before or after they made those initial Bakken picks, we’d love to know what you think — click here to share your thoughts with a brief review. Thank you!

And those of you who haven't retired yet, check this out as we get to the "planning and forecasting" part of the year...

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22 Responses to “Three Bakken Stocks Below $10 to Buy Right Now” (Part One)


  1. GMXR (GMX resources) is a play on the Williston Basin. It recently fell from about $5 to about $1.70 per share, despite recommendations from a couple of newsletters written by Frank Curzio and Matt Badiali. Indeed, Curzio and Badiali withdrew their recommendations and advised selling long before it dropped as far as $1.70 per share. It fell this far because it costs a great deal of capital expenditure funds to play the frac-oil drilling game, and the wells have to do great for the company to do okay. So it was for BEXP. So it wasn’t for GMXR. GMXR isn’t the only company running out of funds and credit for staying in the game. So if you want to play the Triangle, you may find that sucessful performance is quite a bit more complex than you had imagined. Ding ding!

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  2. I’ ve just seen a teaser about OREO/NYSE, with its holdings and drilling perspectives in Nevada. Does anybody out there know anything about it?

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    • oreo appears to be a promotion. i don’t know much about them but i don’t even bother looking when the promoters start the pump and dump scam.

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  3. This would go in my watch list – and I’d sign up for company releases by email if they do that-
    I would be a bit more encouraged if the analyst could verify the mgmt. competence,, but launching a capital intensive service business suggests they’ve had some involvement in this business and their fundraising is admirable. The other clue is they invested in some wells, and I’m led to believe the property they acquired would be in this same area – further de-risking the plan. Nevertheless starting up 2 businesses requiring serious initial capital and mgmt. focus. I’d consider it a plus if and when they are revenue positive and growing these services, Until then, watch.

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  4. OREO made it on Pumps and Dumps website, and of course, not in a good way. The only thing I’ve heard about that listing.

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  5. Brigham was once my favorite Baaken play (sold and took premium from STO buy out). Whiting Oil and Gas is my favorite solid Baaken play now. It has diversified operations in other good production areas, and I still favor solid operations, real earnings, manageable debt and development, with lower PE and PEG multiples. And if we are gonna go a guessing, then I’d guess the future earnings growth is understated. Othewise, KOG is perhaps the most exciting to me among the more speculative plays. I am moving more towards the Eagle Ford plays. The Baaken producers, seemingly because of limited infrastructure, reportedly are having to sell their oil at quite substantial discounts to WTI – but if you have different perspective, love to hear it.

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  6. There are a number of far cheaper prospects re Bakken and related oilfields that are located north of the border in Canada. I’m talking about companies that are producing far more oil and have far less inflated market caps than the American companies that have been hyped ‘to the moon’. I’ll wait for the gumshoe to clue you in.

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  7. You have a great site. Reguarding Kohl. been playin his game for over two year and have made some good money. your have to buy and sell to make too make the profits he can gret you.

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  8. i had 2 takeovrsin one day brigham EL PASO LEAVING ME W//AXAS WHICH LOOKS GOOD i have been looking at crimsson another bakken playboth were in in shale gas moving over to oil

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  9. The Eagle Ford is a complex shale with very different production from one county to the next. This has created great difficulty in estimating production. Without this knowledge, it is hard to know which oil names are good investments. It is widely understood that the condensate window is the best zone from an EUR standpoint.

    Click to enlarge

    In the map above, it shows Eagle Ford’s thickness. Several areas have been in focus. Initially, this play saw significant interest in the Maverick Basin, given the Eagle Ford is consistently shallow and much thicker. Other sweet spots are beginning to pop up, and I hope to show the reasons for this.

    Of all the oil producers in the Eagle Ford, EOG Resources (EOG) has probably done the best job of securing a large leasehold at the lowest price. While others were purchasing large positions in Maverick, Webb, Dimmit and Zavala counties, EOG was focused in adding oil production and realized the southeastern aspect of the oil window seemed to be the best area.

    The image above shows where some of the bigger players, but most importantly shows that EOG purchased acreage following the oil window itself. This was a different approach than that of Chesapeake (CHK), which purchased acreage in an area of the Eagle Ford that was more focused on shale thickness. Another reason to be bullish Gonzales County is the San Marcos Arch. This structure intersects Gonzales County and is proof (to some extent) as to why Gonzales County has been a success.

    EOG Resources has over 100 producing wells in the area and has recorded IP rates between 900 to 1500 Bo/d plus 350 to 1500 Mcf/d. More recently, EOG has had well results of over 3000 BO/d + dry gas and natural gas liquids. Its Gonzales County King Fehner Unit had IP rates of 1238 to 1487 Bo/d plus 1.2 to 1.6 MMcf/d. Also in Gonzales are its Hill Unit #1H and #3H, and the IP rates were 1628 and 1951 Boe/d. The Kerner Carson Unit had IP rates ranging from 1800 to 2600 Boe/d. The Meyer Unit had initial production of 1900 to 3400 Boe/d. The Mitchell Unit has very significant results of 3300 to 3600 Boe/d.

    Gonzales County is currently about three players. The image below shows EOG Resources, Magnum Hunter, and Penn Virginia are working this acreage and getting good results. Keep in mind we are still very early in Gonzales development, and I would guess these numbers will continue to get better as laterals get longer and an increased number of stages are realized.

    Magnum Hunter’s (MHR) acreage located in three separate areas. The largest portion in located in Gonzales and Lavaca counties. This area is one of the best in the Eagle Ford. Magnum has seen a marked improvement in these wells. Wells in Gonzales County and IP rates are:

    Gonzo Hunter #1H: 605 Boe/d (4365 foot lateral)
    Southern Hunter #1H: 1321 Boe/d (4460 foot lateral)
    Gonzo North #1H: 1039 Boe/d (5300 foot lateral)
    Gonzo North #2H: 1336 Boe/d (6120 foot lateral)
    Magnum has steadily increased the length of laterals in its Eagle Ford wells and it also has increased stages. Since its first well in Gonzales County, Magnum has more than doubled this. Magnum’s JV with Hunt in Gonzales County has had lower results than expected:

    Cinco Ranch 1H: 290 Boe/d (5370 foot lateral and 10 stages)
    Cinco Ranch 2H: 396 Boe/d (5540 foot lateral and 16 stages)
    JP Ranch 1H: 738 Boe/d (5804 foot lateral with 16 stages)
    Magnum Hunter estimates its Gonzales County wells will fall between this range:

    $8 to $8.8 million in well costs
    IP rates from 1040 to 1750 Boe/d
    EURs of 400 to 470 MBoe
    Penn Virginia’s (PVA) acreage is located in Gonzales and Lavaca counties. It has operated acreage in Gonzales County and an AMI in Lavaca. All of its acreage is in the volatile oil window. I have had a range of 675 to 1025 Boe/d with respect to its 30-day IP rates. Its production is 94% liquids, with 89% being oil. It expects EURs of 400 MBoe and an average well cost of $8 million. It currently uses a 4000 foot lateral and 15 or 16 stages. Penn Virginia has had some very good IP rates in Gonzales County:

    Gardner 1H: 1247 Boe/d
    Hawn Holt 9H: 1877 Boe/d
    Hawn Holt 10H: 1188 Boe/d
    Hawn Holt 11H: 1190 Boe/d
    Hawn Holt 12H: 1495 Boe/d
    Hawn Holt 13H: 1399 Boe/d
    Hawn Holt 15H: 1298 Boe/d
    Munson Ranch 1H: 1921 Boe/d
    Munson Ranch 3H: 1538 Boe/d
    Munson Ranch 4H: 1426 Boe/d
    Munson Ranch 6H: 1808 Boe/d
    Rock Creek Ranch 1H: 1257 Boe/d
    Schaefer 3H: 1129 Boe/d
    Munson Ranch 5H: 1164 Boe/d
    D. Foreman 1H: 1202 Boe/d
    Forest Oil (FST) has acreage in Gonzales County. Well performance in Gonzales improves to the north and east. Four wells have been completed in southern Gonzales County had an average IP rate of 841 Bo/d+813 Mcf/d. Central Gonzales County has two results that average to 1945 Bo/d+1931 Mcf/d. Also in central Gonzales (to the northeast of the two prior wells), a four well average IP rate calculates to 1219 Bo/d+1297 Mcf/d. Forest completed one well at the northeast border of Gonzales County, which produced an IP rate of 605 Boe/d.

    Sanchez Energy (SN) has acreage in Gonzales County. It states EURs are 450 MBoe to 750 MBoe. Wells costs are $7.5 to $8.5 million. IP rates are from 871 to 1388 Boe/d. Well spacing is currently 120 acres, but Sanchez is testing downspacing to 80 acres. This is the best acreage in its Eagle Ford acreage.

    ZaZa Energy (ZAZA) has 12000 gross acres in Gonzales, Fayette, and Lavaca counties. It completed Crab Ranch A 1H for a 30-day IP rate in northeast Gonzales County of 371 Boe/d.

    Talisman’s (TLM) acreage is mostly in the condensate window. A good portion of this acreage is located in Gonzales, McMullen and La Salle counties. It has EURs of 660 MBoe and an average 30-day IP rate of 1200 Boe/d.

    GeoResources (GEOI) has Eagle Ford acreage in Gonzales County. It is to the northeast of Magnum, EOG and Penn Virginia’s leaseholds. Here are the results from this area:

    Flatonia East 1H and 2H: 30-day average rate of 428 Boe/d
    Newtonville 1H: 30-day IP rate of 566 Boe/d
    Its Gonzales leasehold covers the northern part of the county, with the majority in Fayette. Early results back the assertion this acreage is as good in Fayette as it is in Gonzales, but of lesser quality than EOG Resources’ acreage. GeoResources states it expects EURs from 325 to 500 MBoe. Wells will have 150 acre spacing.

    Rosetta (ROSE) has acreage in southern Gonzales County. A recent test well provided a result of 3033 Boe/d. This 24-hour production broke down into:

    2450 Bpd of Oil
    250 Bpd Natural Gas Liquids
    2000 Mcfpd
    A very specific part of Gonzales County seems to have the most upside. The southeastern border of the county has the thickest shale, and has produced some very good wells. IP rates have exceeded 3000 Bo/d plus natural gas liquids and dry gas. Given the thickness of shale, it is probable we will see further well downspacing. Many of the producers have maintained EURs of 400 MBoe, while EOG just raised this number to 450 MBoe. Sanchez believes the best wells in Gonzales could produce as much as 750 MBoe. Given EOG’s most recent results, the best wells could be closer to 900 MBoe, and that is with a 4000 foot lateral and $5.5 million well cost.

    Disclosure: I am long SN.

    Additional disclosure: This is not a buy recommendation.

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    • Thanks for the in-depth info. Appreciate it so much and hope you could update me on the above info. Thanks again

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  10. Question: is there an ETF for the Bakken formation oil companies (and related, such as Eagle Ford)? And the same for the Canadian oil sands, is there an ETF for it? My idea is the get a whole set of companies in one bunch.
    Thanks!

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    • There are 4 ETF’s that include the Bakken Players, and they have split all companies up between the 4 ETF’s so to Ivest in all of the players you’d have to invest in all 4 EFT’s.
      They are: XLE: XOP: IEO: and PXE.

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