As the world watches the dreadful scenes coming from the BP oil
spill, the blame game ratchets up and now it’s reported that over 100
lawsuits have been filed in relation to the spill. Tough times for BP,
Transocean, and Halliburton.
Given all the attention to the Gulf Coast scant attention is being
paid to one of the fastest growing oil regions in the nation. I’m sure
you’ve heard of it. It’s called the Bakken. It’s a region in the upper
Midwest of the U.S. and lower Canadian Plains. Unlike much of the
continental oil development fields that rely on extracting oil from sand
and shale deposits, the Bakken produces light sweet crude: the
preference of most oil refiners.
The Bakken pool is part of a larger oil-bearing shale formation
called the Williston Basin. The Williston Basin covers parts of Wyoming,
the Dakotas, Montana, and Canada.
Some believe the Williston Basin holds hundreds of billions of
barrels of recoverable oil. But right now, the most firm estimates are
for the Bakken pool. Recoverable oil in the Bakken is estimated to be 5
That’s a substantial amount of oil. And even better, it’s fairly
and somewhat inexpensive to recover with horizontal drilling
I recently recommended several companies in this region to readers
Energy World Profits, my energy investment newsletter
service. One of my favorites, though all of them are great investments,
is Northern Oil and Gas (AMEX:NOG).
Northern Oil and Gas may be the best Bakken oil producer you have
never heard of. I don’t why the company has stayed below the radar of
the investment community. But I do know it won’t continue to do so. Not
when revenues and earnings are growing as fast as they are.
Oil & Gas explores for and develops oil and natural gas properties
in the Rocky Mountain region of the U.S. The company is emerging from
development stage and has recently started to bring production online.
And that means it’s a great time to buy the stock.
approximately 70,000 acres in the Williston Basin Bakken and Three Forks
Play, where rapid development is bringing online production closer by
Currently 60 rigs are actively drilling in North Dakota,
up 100% from 30 rigs in February of 2009. For next year, Northern Oil
has already set aside over $50 million to drill between 14 and 16 wells
in this region. Continued increases in drilling activity will speed up
the development of their core acreage position.
The company is
showing no signs of slowing down drilling – and is actively seeking
money to fund growth. In November 2009, the company completed a
secondary stock offering of 6.5 million shares and the $60 million in
proceeds is decreasing the
company’s debt-load and financing
expansion. Another secondary at $16 a share in April 2010 netted $82
million for the company.
It should be noted that the investment
community is happy to buy the stock of companies with Bakken oil
For 2011, we expect the company to make a second
consecutive triple digit percentage gain to $1.10 per share. Revenue
will also significantly increase – by over 250% – to $135 million in
The company is new to profitability, which can mean that
earnings will be erratic in the future. We will use a 25 times forward
multiple and adjust this number if necessary. The result gives us a
target price of $27.50.
We are optimistic about the development
in the Bakken and Three Forks regions. In addition, the company has
proven that they can keep costs to a minimum when drilling new sites.
This ability will allow the company to puff up earnings as they complete
wells at higher oil prices.
I’ve recommended to Energy
World Profits readers to buy Northern Oil & Gas at or below
$18 a share.
Northern Oil and Gas is one of three oil recommendations in my just
released special report, Bakken Profits: 3 Top Oil & Gas
Stocks from the Fastest Growing Oil Region in the U.S.
If you’re interested in how to profit from the Bakken and getting
comprehensive research on steady, solid energy investment opportunities I
suggest you take a couple minutes to find out more about Energy