Triangle Petroleum (TPLM) came within pennies of doubling since I profiled it at $5.40 a share back in June on Friday. This was twenty months before my prediction that the fast growing concern could achieve those levels. Triangle shows there can quite a bit a value still left among the smaller Bakken players. I view these small E&P firms almost like biotechs and use the same form of "shotgun investing" I do with that sector. Here are two small Bakken producers which could award aggressive growth investors in the future.
Emerald Oil (EOX) is a small (~$330mm) capitalization Bakken producer that I think has significant upside. It has fast growing production with sales tracking to better than a 70% gain this fiscal year and analysts' consensus for FY2014 have revenue more than doubling. A beneficial owner obviously finds the shares attractive as the entity took more than a $16mm stake in the firm in late May.
The company also offers a solid balance sheet with over $70mm (>20% of its current market capitalization) after a recent offering. In addition, an interesting note came out from SunTrust Robinson on Friday that buoyed the shares. SunTrust's analyst believes the technology being pioneered by Whiting Petroleum (WLL) will spread to other Bakken producers.
Specifically, the analyst noted that "Whiting Petroleum's new well completion technique looks revolutionary and inventory may be 'deeper' than expected as a result. Other Bakken companies such as Emerald Oil are likely to benefit from new concepts and higher productivity due to their exposure to the western part of the basin."
Northern Oil & Gas (NOG) is another slightly bigger (~$1B market capitalization) Bakken player that should benefit from the same well completion techniques that Whiting is currently pioneering. The company is growing revenues in the mid-teens and analysts expect this to continue in FY2014 and beyond.
The shares are not expensive given its growth selling at under 12x forward earnings, a deep discount to its five year average (27.1). The stock also has a minuscule five year projected PEG (.39) as well. In addition, Northern has ~tripled its operational cash flow over the past three years.
Canaccord Genuity initiated the shares as a "Buy" in September and the median price target held by the 10 analysts that follow the stock is $17.50 a share. Technically, the shares just crossed their 200 day moving average for the first time since January in late September.
The company's wells are non-operated and has already seen operating costs drop by $1mm a well with Continental Resources (CLR) who operates ~12% of its wells. As new techniques continue to drop operational costs in the Bakken, Northern should be a core beneficiary.