“Ride to Oil Riches with the Lucky Tombstone Kid: Stake Your Claim in the Three Bakkens”

Sniffing out Roger Conrad's No. 1 pick in the "three Bakkens" for his Canadian Edge newsletter

By Travis Johnson, Stock Gumshoe, March 13, 2012

The copywriters over at Investing Daily certainly spin a good tale — we’ve seen pitches about the discovery of South Pacific wonder-ports, secret buyouts by the Rockefellers, and plenty of tales of mouth-watering dividends that make even the most boring companies sound sexy … so I do always enjoy seeing a new tease for picks from Roger Conrad, Yiannis Mostrous or Elliott Gue.

So naturally, when readers started forwarding Roger Conrad’s latest missive en masse, my Gumshoe sensors started tingling — and it doesn’t hurt that I’ve liked plenty of Conrad’s past picks, or that they tend to be dividend-paying and relatively large, stable companies (not always, of course — we’ve always got the Yellow Pages Income Fund to mention, along with its drop from $6 to 11 cents when we feel the need to note that not every pick of his makes sense … presumably he sold out of that one somewhere during the collapse).

This one is much more in Conrad’s bailiwick — he has covered what were the Canadian Royalty Trusts for years, more closely that any other newsletter guy I can think of, and he has continued to focus on high-yielding Canadian stocks, usually in the energy business, in the years since the trusts started to be phased out. The pick he’s teasing today, run by a young CEO who he calls the “Tombstone Kid,” is a former trust that converted to a corporation back in 2009 but still pays a good dividend. So there’s one hint from me, how does Conrad tease his “No. 1 pick in the three Bakkens” that he expects will “catapult itself into the oil major league?”

Here’s a taste:

“Out west, a little-known energy outfit led by a brash, young and quick-on-the-draw CEO is proving there’s more than one way to build an oil fortune in the Bakken Shale…

“Ride to Oil Riches with the Lucky “Tombstone”* Kid

“… and you’ll profit from the best of THREE Bakkens.

“Did you know three major oil discoveries exist in the Bakken region?

“Many investors are still unaware. Even fewer know the name of the company now in position to pump light, sweet crude from all three finds simultaneously.

“This fast-rising company is run by a colorful ex-National Hockey League guy—the Tombstone Kid—who’s already turned scores of ordinary investors into Canadian Bakken millionaires.

“Even better, he’s about to do it again… this time south of the border. Saddle up now and join with The Kid and his hard-charging team for the gallop to big Bakken oil profits…”

See? What did I tell you — always a fun story to be told. The basic pitch is that this “Tombstone Kid” has made people rich with his prescient investments in the Bakken plays on the Canadian side of the border … and now he’s “galloping” toward the oil on the U.S. side, too.

There’s even a story behind the “tombstone” bit — all about poker chips and a poorly-timed IPO that was planned right around the time of the 9/11 attacks. Here’s a bit of that:

“It all begins with a handful of poker chips.

“When the venture capitalists staked the cocky then-33-year-old to an $8 million oil biz start-up fund, they handed him a gift of poker chips — called “tombstones” in the business — as a reminder of the risky nature of the deal.

“That was eleven years ago.

“The Kid still carries those poker chips — “tombstones” — as a reminder of the risk and hard work that went into taking his outfit from a mere 275 barrels of oil and oil equivalent per day to over 83,000 barrels per day and a $13 billion market cap… while putting his company in prime position to catapult to major oil league status.”

So … that’s actually enough to identify our “Tombstone Kid,” but let’s get a little bit more of Conrad’s tease so we can get a taste of his argument for buying these shares:

“It is, very simply, one of the most innovatively managed energy companies I’ve ever encountered in my decades covering the field.

“Growth, Growth, Growth

“A growing business is the best guarantor of a high yield.

“And growth is the hallmark of my top recommendation. Again, in a remarkably short period of time, their market cap has surged to nearly $13 billion.

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“This eye-popping growth has occurred because, time after time, The Kid and his partners have shown uncanny skill at corporate takeovers and even more brilliance in investing in drilling rights and operating highly productive wells.

“On top of these successes, they’ve capitalized on extraordinarily innovative oil recovery techniques—including one method (scoffed at by naysaying competitors) that boosts recovery rates in many tight oil plays by up to 58% ….

“… the company holds dominant positions in the Viewfield Bakken—the Canadian portion of the North Dakota Bakken—and the Lower Shaunavon in southwest Saskatchewan.

“Regarding the latter, The Kid and company just agreed to buy a rival exploration outfit, strengthening its position as the largest player in the Shaunavon, one of the richest plays in Saskatchewan.

“This is truly a major acquisition.

“Shaunavon is the third-largest resource pool ever discovered in Canada, and The Kid’s company now owns 90 percent of the land….

“Ever on the prowl, the company also acquired land in the Swan Hills area of west central Alberta, which one inside source believes could potentially double their current net asset value in the next three to five years.”

Conrad also notes that they were one of the few to avoid dividend/distribution cuts during the last market crash, and he thinks they have “rock solid” financials, and the “stage is set” for another massive profit run for the stock (they did have a huge run recovering from the 2008 lows).

So who is it?

Toss all that into the mighty, mighty Thinkolator and we can tell you that this is certainly … Crescent Point Energy (CPG in Toronto, CSCTF on the pink sheets).

Crescent Point is indeed a former trust, they converted to corporate status in the Summer of 2009. And their CEO, Scott Saxberg, is a prominent young leader who was recently named “Oilman of the Year” and came from a decidedly non-energy family (sounds like he had his heart set on be