Demand Will Stay High for Northern Oil and Gas

Aug.10.10 | About: Northern Oil (NOG)

The tragedy in the Gulf States has certainly put deep water drilling in question. Regardless of your stance on energy, the United States continues to consume a tremendous amount of fossil fuels. America’s thirst for oil and natural gas continues and will continue for the foreseeable future.

The advent of the electric car will certainly shift the way Americans consume fossil fuels. Even according to optimistic views, the electric car will not replace the gasoline powered vehicles for quite some time, leaving the need for oil. In addition, electric cars need to be charged. Whether it be with quick charge stations or at home, the electricity will need to be generated and natural gas powered plants will continue to be in demand.

One stock in demand has been and will continue to be Northern Oil and Gas Inc (NYSEMKT:NOG). NOG operates in the Rocky Mountains, exploring and extracting oil and gas. What is encouraging has been the recent surge in earnings per share for NOG. The last two quarters NOG saw a growth of 600% both quarters. Regardless of the reason, this surge in earnings per share growth has been helped by the growth in sales.

The last six quarters of sales growth have been phenomenal for NOG. They go as follows: 128%, 195, 257, 237, 994, and 615. History has shown the greatest stock performers of all time show tremendous growth in sales and earnings. The fundamental growth story is here and with plenty of stocks within the group showing strength: Energy XXI (EXXI), Brigham Exploration (BEXP), Petroleum Development (PETD).

In early April of 2010, the stock hit an all-time high of 18.00, but the stock pulled back along with the rest of the market during the European Debt crisis. Since that time the stock corrected 35% and is currently trading a little over 10% from its high. Its price action hasn’t been the most clean, but institutions have been buying the stock, where the number of funds buying has gone from 41 to 48 during the most recent quarter.

If NOG can continue to act in a positive manner and break out with big volume, it would produce a long signal. The stock is a little extended beyond its 50 day moving average and a tighter cut loss should be implemented.

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Disclosure: No positions