As I am looking around for different oil and gas exploration and production companies with good growth and even better demographics, I keep heading back to the same locale. The Bakken Shale, better known as North Dakota's property tax cut, looks to have promise for some time to come. As the United States and China continue to consume oil as soon as it can be produced, it can only be thought that the price of oil with continue to head higher. Since the Bakken is about 95% oil, it stands to reason this area will be profitable for some time.
One of the smaller players in the Bakken is Abraxas Petroleum Corp. (ABP). Abraxas is located in San Antonio, Tex. and has holdings in several shales in the United States. It has about 21,000 net acres in the Bakken, with approximately 100 (1,280-acre) units. Abraxas has no lease expirations in this area. Although its acreage is not very sizable, if we are to look at net Bakken acres per $1 million of enterprise value, we see that this ratio places ABP at close to the same size at Whiting Petroleum Corp. (WLL), which places its holdings higher than the likes of EOG Resources Inc. (EOG) and Hess Corp. (HES).
Abraxas has 8,333 acres in Eagle Ford. This location, part of a $25 million equity investment, is 43% oil, 35% gas/condensate, and 22% gas window. The company also has approximately 14,000 acres in the Niobrara shale, with 3,800 gross acres leased and 11 producing wells. Its holdings are in the same area with Chesapeake (CHK) and EOG Resources. In the Southern Alberta Bakken it has approximately 10,000 acres leased. Abraxas also has a small holding in the Pekisko Fairway in Canada.
On Nov. 30, 2010, Abraxas stated that its current proven reserves came to $3.31 in NAV/share. With its proved and identified reserves in the Bakken, Eagle Ford and Niobrara, it came up with a value of $13.51 NAV/share. When adding together proved plus identified plus resource reserves in Bakken, Eagle Ford and Niobrara, the value comes to $31.35.
These figures do not give a good idea of the true value of the company, but does highlight what the company will be worth if its current leaseholds have the value that is being speculated. Abraxas is about half-owned by institutions, with approximately 10% insider-owned. High-quality assets seem to be the key. The locations this company has are in good areas. This year it will be spending $40 million on capex. The company is well-hedged to protect to the downside.
Its proved reserves are 24.9 MMboe; proved developed is 56%; net proved reserves as of December 31, 2009 had 36% coming from the Gulf Coast, 29% from the Rocky Mountains, 22% Permian Basin, and 13% MIdcontinent. Daily net production from September 30, 2010 had 32% from the Permian Basin, 28% Rocky Mountain, 27% Gulf Coast and 13% Midcontinent.
Going forward, there are several near-term catalysts that can help Abraxas' stock appreciation. It operates wells in the Bakken, West Texas, South Texas, and Canada. Abraxas has outside operated wells in the Bakken. Most of its capex is going to producing more oil. Its goal this year is to try to get to a 50% oil/gas mix. In the Eagle Ford, it would like to accelerate its partnership with the JV. Last year it had asset sales of $34 million (non-core and non-operated). The money is used for this year's capex and to pay down debt. It would like to eventually get 90% of its assets operating.
Abraxas' Rocky Mountain assets has 7.2 MMBoe in proven reserves; 63% of this is proved developed, 82% is crude oil, with 1063 Boepd of production, 900 gross producing wells, and 90,362 gross acres. Primary locations here are the Willston Basin, Powder River Basin, Green River Basin, and Unita Basin.
The Permian Basin has 5.6 MMBoe of proved reserves; 66% proved developed; 70% is natural gas. There is also 1254 Boepd of production; 237 gross producing wells; 36,064 acres, The primary producing sub-basins are the Delaware Basin and Eastern Shelf.
The Gulf Coast has 9 MMBoe of proved reserves; 38% is proved developed; 91% is natural gas; 1044 Boepd of production. This area has 74 gross producing wells, and Abraxas has 11,414 acres in the area. The primary sub-producing basin is the Onshore Gulf Coast.
This company looks to be another oil and gas exploration and production company with great assets that, in time, could turn into something great if everything works out. It is well positioned, especially if oil gets up to around a $100 a barrel and stays there for a while.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ABP over the next 72 hours.