American Eagle Energy: A Bakken Energy Play With Strong Growth And High Quality Management

Dec. 5.12 | About: American Eagle (AMZG)

American Eagle Energy Corporation (NYSEMKT:AMZG) is an independent company focusing on the acquisition, exploration, production and development of oil and gas properties in North America. The company specializes in exploiting unconventional oil and shale natural gas plays within the Bakken and Three Forks formations, situated within the Williston Basin in North Dakota and Montana region. Ranked as one of the largest oil plays in the U.S.

The experienced management of American Eagle Energy Corp has extensive oil exploration, development and production expertise, focusing in recent years on exploiting oil-prone formations in the Northern Rockies and Bakken Resources. The company has technical expertise and has successfully secured and developed a portfolio of strategic oil prone properties. The company's Chairman and Director, Mr. Findley, has been credited with discovering the Bakken Formation in the Elm Coulee Field, one of the largest resource plays in North America.

The company portfolio of properties includes Hardy Property, Spyglass Property, Benrude Property, Glacier Prospect, Sidney North Prospect, West Spyglass Prospect and Archer Prospect falling in the Bakken region. The company owns varied working interests (25-100%) in strategic oil prone properties with a total of 58,458 acres, proven reserves of 1.75 MMBOE, with current production levels of over 500-700 BOPD.

The company's focused geology, Bakken region, has estimated, undiscovered, technically recoverable, oil reserves of 3.0 to 4.3 billion barrels. As per the U.S. Energy Information Administration (EIA) data, as of the end of 2010 the North Dakota region had 1,185 billion cubic feet of proven reserves of shale gas.

Considering the huge natural-gas resource base in North America, the EIA has projected the U.S. to become a net exporter of natural gas by 2022, helped by unlocking of the shale natural gas reserves in the country. The exploration & production of unconventional oil and gas (tight oil and shale gas) is expected to add over one-and-half million jobs and contribute nearly $200 billion to the US GDP by 2015.

The company's participation with a group of quality operators reduces its individual operating risk including risks involved in oil & gas exploration & production, drilling and exposure to wells. This provides diversification across the core areas of the play.

At the current market capitalization of $33 million, the company is valued at P/E ratio of 12x and EV/EBITDA ratio of 10x 2014 earnings. On an EV/Proven Reserves basis, we arrive at a value of US$49.7 million for the company, equal to $1.08 per share (50% above the current share price). We note as well that the company has $0.42 of cash per share on the balance sheet.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.