Time To Buy This Bakken Juggernaut

| About: Continental Resources, (CLR)

Two significant news items came out this week that underscored the impressive oil & gas domestic expansion of the last decade. The International Energy Agency came out with a report saying the United States will overtake Saudi Arabia to become the world's largest oil producer by 2020. One of the keys to this amazing production growth is the Bakken reserve in North Dakota which is projected to yield more than 1mm barrels a day by mid-2013. It sounds like an opportune time to invest in Continental Resources (NYSE:CLR) the biggest leaseholder in this shale play. CLR seems undervalued compared to its growth prospects.

Continental Resources produces crude oil and natural gas. It is the biggest producer of energy from the fast rising Bakken reserve.

7 reasons CLR is a good growth play at $70 a share:

  1. Earnings are growing at an impressive clip. CLR made $2.75 a share in FY2011 but is on track to earn $3.20 a share in FY2012. Analysts expect earnings to increase some 40% in FY2013 to $4.60.
  2. Consensus earnings estimates for FY2012 and FY2013 have risen nicely over the past two months, a rarity for third quarter earnings cycle.
  3. The 21 analysts that cover the stock is $97 a share, implying around 40% consensus upside. Both RBC Capital Markets and Howard Weill have upgraded the shares over the last month.
  4. Continental will have better than 40% revenue growth in FY2012 and projections call for almost 35% sales increases in FY2013. The stock goes for a five year projected PEG of under 1 (.75). It grew production growth by 55% Y/Y in the third quarter.
  5. CLR is selling at just over 15 times forward earnings, a significant discount to its five year average (27.7).
  6. The stock is selling in the bottom third of its five year valuation range based on P/S, P/CF and P/B.
  7. The vast majority of its production is oil, although recent higher natural gas price will flow through to the bottom line as well.

Disclosure: I am long CLR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.