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

Digging into Keith Kohl's newest Bakken teaser from the $20 Trillion Report

By Travis Johnson, Stock Gumshoe, November 14, 2011

“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!

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

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Venture Shadow
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Venture Shadow
November 14, 2011 7:45 pm
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… Read more »
JB
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JB
November 14, 2011 9:59 pm

Thanks for your comments & caveat.

Chris
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Chris
November 15, 2011 12:35 am

Any talk about petro one petroleum they seem to be having some positive news in the area as well
. Thanks

Novice Trader
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Novice Trader
November 15, 2011 2:07 pm

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?

fireball
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fireball
March 15, 2012 3:35 pm

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.

Chris
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Chris
November 15, 2011 5:11 pm

Sorry meant petro one energy.Pop.v

toedtman
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toedtman
November 17, 2011 3:20 am
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… Read more »
gwtyner54
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gwtyner54
November 19, 2011 11:11 am

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.

jazzman777
Irregular
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jazzman777
November 20, 2011 12:53 pm

Most of these shallow risky stocks are of the Pump and Dump nature..They don’t care about you making money, they care about making their $$$ and leaving you in the dumps!!!

Fred
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Fred
March 15, 2012 3:15 pm
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… Read more »
Jim Mitchell
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Jim Mitchell
July 4, 2013 8:27 am

Had a double with KOG and close for another double that has been slow for the last year.

hh
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hh
March 15, 2012 3:26 pm

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.

ahamed
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ahamed
March 19, 2012 11:07 am

which companies?

1paglee
Irregular
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1paglee
March 15, 2012 5:04 pm

I bought some TPLM awhile ago and am down only 6% on it. Still waiting ….

ken
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ken
March 16, 2012 4:24 pm

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.

Judy
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Judy
March 16, 2012 5:07 pm

China has some Bakken. I don’t know who the oil and gas company is though.

whgo noze
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March 18, 2012 3:57 am

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

LARRY
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LARRY
May 2, 2012 12:20 pm
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… Read more »
Ramon Caluttung
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Ramon Caluttung
October 27, 2012 11:36 am

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

PatDenver
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PatDenver
December 10, 2012 12:27 pm

Thank you all for your insight. It is helpful.
Pat

Ronald
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Ronald
January 24, 2013 4:01 am

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!

Racheal
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0
March 19, 2013 1:58 pm

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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