“Bakken Oil Play You’ve Never Heard of … Stealth Trade of the Year”

By Travis Johnson, Stock Gumshoe, August 16, 2011

The following is an excerpt from an article I published for the Stock Gumshoe Irregulars (our paid members) in the Friday File on July 1. It has NOT been updated, though I don’t believe there’s been official news from the company in the interim, and the ad it’s based on is running again with much the same (if not the exact same) message. I have updated only the disclosure information about which stocks I own at the bottom.

Keith Schaefer is teasing potential subscribers to his Oil & Gas Investments Bulletin, a relatively new newsletter, about a shale oil play that he calls the “stealth trade of the year.” Sounds exciting, right? I thought it was interesting, and after doing some initial research earlier in the week one of the companies I found was intriguing enough to me that I opened a small position yesterday … but I hadn’t scoured the ad fully enough to be sure I was right about what he’s teasing, so let’s get into that now.

Schaefer knows how to get our attention — mention the big millionaire-maker Bakken oil juniors who got all our attention a few years ago when the Bakken play in the Williston Basin was just starting to heat up, stocks like Brigham Exploration (BEXP), Northern Oil and Gas (NOG), and Kodiak Oil (KOG). Here’s what he says:

“If you were among the many investors who’ve taken Bakken profits to the bank… then it’s well done to you.

“And if you missed out on the opportunity to capitalize on the Bakken’s early plays, I have some very good news to share.

“In the next 15 minutes, I’ll show you a repeat of the Bakken oil play… emerging right now.

“It’s an early-stage play. Several junior oil companies have large land positions in the heart of it – a perfect scenario.

“And they have all the upside of the original Bakken juniors….”

It’s a tempting premise for those of us who didn’t do much investing around the first Bakken land rush and missed out on those profits (I’m looking in the mirror here). So where is this “new Bakken?”

“This new Bakken play isn’t in North Dakota (which – thanks to the Bakken – is now the fourth-highest oil-producing state in the U.S.).

“Part of it is in northwest Montana – but far away from the original Bakken, and in a totally different geologic setting.

“It’s called the Alberta Bakken.

“It now stretches roughly 40 miles on each side of the Montana/Alberta border. Exploration is continuing.

“And it’s about to become the next big shale oil field in North America.”

He goes on to tell us that this Alberta Bakken is already heating up — with the “original Alberta Bakken players” Rosetta Resources (ROSE) and Newfield Explorations (NFX) already producing oil, and land prices going up from under $100 per acre to over $1,700 per acre in the last year. And this little company apparently snuck in the back door, when no one was excited about oil here:

“So how did this small junior oil company – my favourite new pick – end up with nearly 200,000 acres, in the hottest shale oil play in North America?

“It literally fell into their lap.

“You see, they bought it as a natural gas play several years ago. They picked it up quite cheap.”

Some other companies are mentioned who have helped to raise the profile of what Schaefer says is still a “stealth” play — including larger firms like Murphy Oil (MUR) and Crescent Point (CPG in Toronto), which is helping to increase attention and land prices. He says that the first catalyst for the region was Rosetta’s announcement of potentially huge resources (10-13 million barrels per square mile) in their Alberta Bakken holdings, and the second catalyst was when Crescent Point bought a huge land position in the area last Fall. But there’s one small company that he apparently likes best of all that’s part of the next catalyst:

“The third catalyst just happened just a few months ago, when two companies – including my favourite – announced successful wells in the Alberta Bakken.

“Now there’s one more thing I like about this play:

“It’s cut off to the north, east, and west.

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