Benefiting From The Bakken Oil Boom: Continental Resources, Rose Rock Midstream

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 |  Includes: CLR, RRMS
by: Sean Croley

Summary

CLR and RRMS are significantly outperforming the S&P 500 Index YTD.

CLR and RRMS both have significant exposure to the Bakken, as well as other domestic oil fields.

CLR and RRMS both are exhibiting some positive fundamentals as well as bullish technicals.

In case you haven't been paying attention lately, there is an oil boom taking place in America's heartland. Of course, there are number of ways to buys into the 'black gold' bonanza. I'd like to highlight just two companies that you may, or may not, be familiar with that have been outperforming the market this year, Continental Resources (NYSE:CLR) and Rose Rock Midstream LP (NYSE:RRMS).

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XLE Year to Date Price Returns data by YCharts

Continental Resources Inc.

Market Cap: 22.7B
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CLR data by YCharts

Continental Resources is an independent crude oil and natural gas production and exploration company that operates entirely within the continental United States. The company separates it operations into three regions:

  1. North - All properties north of Kansas and west of the Mississippi River, and includes parts of the North Dakota Bakken, Montana Bakken, Red River unit, and the Niobrara play in Wyoming and Colorado.
  2. South - All properties to the south of Kansas (Kansas included) and west of the Mississippi River including the Anadarko Woodford and Arkoma Woodford plays in Oklahoma.
  3. East - All properties east of the Mississippi River, including the Illinois Basin and holdings in the state of Michigan.

Positive Fundamentals

  • Net profit margin of 22.12% versus 9.77% industry average
  • ROE of 21.48% versus 7.12% industry average
  • Sales growth (5 years) of 29.18% versus 7.83% industry average

Bullish Technicals

  • The 200-day, 50-day, and 20-day Moving Averages are all on the rise, showing prices are rising whether you are looking at the long, medium, or short term periods. This is a bullish indicator.
  • The MACD recently showed a bullish cross on the positive side of the momentum range, again indicating a short-term rise amid a medium-term rise in price.

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Continental Resources is a large-cap stock that offers you the opportunity to concentrate on domestic exploration and production, especially in the Bakken. It as at least worth considering as one constituent of the Energy Sector portion of your diversified portfolio.

Rose Rock Midstream LP

Market Cap: 1.1B

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RRMS data by YCharts

Rose Rock Midstream LP is, as the name implies, a limited partnership, but its shares (partnership interests) are publicly traded on the NYSE under the ticker symbol RRMS. Its assets and operations are conducted entirely by its wholly owned subsidiary Rose Rock Midstream Operating, LLC.

The company owns and operates a diversified portfolio of 'midstream energy assets'. Midstream assets are described as the businesses of gathering, transporting, storing, distributing and marketing.

  1. Operating in Colorado, Kansas, Minnesota, Montana, North Dakota, Oklahoma and Texas.
  2. Exposure to the Bakken Shale, the Denver-Julesburg Basin, the Niobrara Shale, the Granite Wash, and the Mississippi Lime play.

Positive Fundamentals

  • Price/Earnings (TTM) of 26.4 versus 30.6 industry average
  • Price/Sales of 1.9 versus 3.30 industry average
  • Price/Tangible Book of 3.6 versus 5.9 industry average
  • Total Debt/Equity (MRQ) of 0.2 versus 0.6 industry average
  • ROE of 10.1% versus 7.8% industry average
  • EPS (TTM over TTM) of 329% versus 68% industry average

Bullish Technicals (same signals as CLR)

  • The 200-day, 50-day, and 20-day Moving Averages are all on the rise, showing prices are rising whether you are looking at the long, medium, or short term periods. This is a bullish indicator.
  • The MACD recently showed a bullish cross on the positive side of the momentum range, again indicating a short-term rise amid a medium-term rise in price.

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Rose Rock Midstream is a small-cap company and trading volumes are light, with a daily average of just 40,000 shares. In turn, the bid/ask spread is usually pretty wide, usually around $0.10. Short-term traders, this one is probably not for you. But long-term investors could consider taking a flyer on this one with a small speculative position.

Disclosure: I am long CLR, RRMS. 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.