2 Small Bakken Players For Aggressive Growth Investors

Includes: EOX, NOG
by: Bret Jensen

Triangle Petroleum (NYSEMKT: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 (NYSEMKT: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 (NYSE: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 (NYSEMKT: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 (NYSE:CLR) who operates ~12% of its wells. As new techniques continue to drop operational costs in the Bakken, Northern should be a core beneficiary.

Disclosure: I am long EOX. 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.