2 Bakken Plays That Should Still Work In 2014

Includes: AXAS, TPLM
by: Bret Jensen

I spent a good part of the weekend reviewing my portfolio looking for themes that worked in 2013, ones that did not do so well during the year and what trends should continue into the New Year.

One strategy that worked extremely well in 2013 were some of my investments in small Bakken E & P plays. I believe this will continue into 2014 as the country is still in the early innings of a massive energy production boom. Here are two of these holdings that had outstanding years in 2013 but should still reward shareholders in 2014.

I did a profile piece on Triangle Petroleum (NYSEMKT:TPLM) in early June postulating I thought the shares could double in two years. The stock did exactly that - over the next four months. It has pulled back some 25% from those highs along with most small E & P concerns recently and is offering another good entry point for long term growth investors.

Revenue growth exploded in 2013 and sales should show an over 300% gain this fiscal year. Analysts believe that growth rate will slow to 'only' ~60% in FY2014. The stock also sports a ridiculously minuscule five year projected PEG (.24) currently.

After posting a loss in FY2012, Triangle should deliver over 70 cents a share in earnings this fiscal year and another 20% to 25% gain is in the cards for FY2014. Given its growth rate, the stock is too cheap at just over 10x forward earnings.

I have also done well with Abraxas Petroleum (NASDAQ:AXAS) which is up some 60% since I highlighted it at $2 a share in early July. The company now has a market capitalization of ~$300mm and I would look for that value to continue to increase in 2014.

Abraxas posted ~breakeven results in FY2012 but is tracking to post 20 cents a share in the black for FY2013. The consensus estimate for FY2014 currently calls for a 60% gain in earnings in the coming year.

While not growing production as impressively as Triangle, Abraxas should post a revenue increase north of 35% this fiscal year and analysts believe another ~20% gain will take place in the coming year. Insiders continue to be net buyers of the stock and AXAS is priced at just over 10x forward earnings.

I don't expect either of these Bakken plays to deliver at the same stellar pace they have for shareholders over the prior six months, but I think they should continue to be outperformers in the market for 2014.

Disclosure: I am long AXAS, TPLM. 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.