After writing 8 Small Oil and Natural Gas Companies With Continued Upside, I had used the market capitalization cut off at $65 million. This list will offer the same description, but only cover names above the $65 million mark. I'm only going to list companies I believe have significant upside, so if a few names are left out this is the reason why.
Tengasco Inc. (TGC) is an oil and gas exploration and production company with emphasis on Kansas and Tennessee. Tengasco has 171 active producing wells in with most in the Central Kansas Uplift. It has 20,971 acres leased with 14,261 in production. Kansas accounts for 91% of revenues and 92% of company production. Tengasco's daily production is 600 barrels of oil per day. Its Tennessee property has four wells producing oil and 21 producing natural gas. Tengasco has a wholly owned subsidiary that operates pipelines in the areas. With the majority of the company's revenues coming from oil and with large oil price increases, Tengasco's future is looking brighter. Recent support for natural gas could also lead Tengasco to start drilling for gas in Tennessee. This company is up about 300% over the past year. It was not long ago this company was worried about viability.
P/E Ratio- Negative
Price to Sales- 2.89
Price to Tangible Book- 1.52
Double Eagle Petroleum Co. (DBLE) is an oil and natural gas exploration and production company. Its interests are centered in the Rocky Mountain region. Double also transports gas through its interstate pipeline. Historically Double Eagle has been a coal bed methane producer. Although this is a low cost producer, most of the excitement is about its Niobrara acreage. Double Eagle currently has 71,248 net acres in this area. I would guess not all of this acreage is in liquids, but it will only take one major find to create a large upside to the stock price. Double Eagle has produced an implied value to its company based on reserves, the Niobrara acreage and it pipeline. This implied net asset value per share is:
- Low Implied Net Asset Value- $213.5 million or $18.75/share
- High Implied Net Asset Value- $481 million or $56.34/share
The largest difference between the net asset values is the Niobrara acreage. Take note, this is Double Eagle's own valuation estimate and should be treated as such.
- P/E Ratio- 56.5
- Price to Sales- 1.38
- Price to Tangible Book- 1.04
Credo Petroleum (CRED) seems to be in a position for improvement. Credo has seen better times as it once traded at $30 a share. This company used to derive most of its revenue from natural gas. Credo is trying to change with the current pricing environment and is increasing oil production. Credo's areas of operation are:
- Central Kansas Uplift - 150,000 Gross/90,000 Net Acres
- N.W. Oklahoma - 75,000 Gross Acres
- North Dakota - 7,000 Gross/5,734 Net Acres
- Texas Panhandle - 3,000 Gross Acres
- Southern Oklahoma - 4 Waterfloods
Although its Kansas acreage is worth a fraction of its Bakken, Credo is increasing production. It has had a 40% success rate, and has a completed well cost of $465,000. Credo estimates reserves per well of 42 MBO. Total net reserves of 1.6 million barrels of oil. Credo's Bakken acreage is a prime location. Acreages adjacent to its positions are owned by Marathon (MRO), XTO (XOM) and Williams (WMB). On November 15, 2010, Williams purchased 86,000 acres in the area for $11,000/acre. Credo maintains net reserves of 4.2 million Bbls and 3.6 Bcf are in its Bakken acres. The waterfloods in southern Oklahoma have a 400 Bopd with a 70% oil cut. Humphreys Prospect has net reserves of 640,000 Bbls and 10 Bcf. Credo has the ability to increase production and will be able to add gas production when pricing improves. For more information on this stock check out Credo Petroleum: Worth a Look.
- P/E Ratio- 62
- Price to Sales- 7.04
- Price to Tangible Book- 1.87
RAM Energy Resources (RAME) recently reduced its overall debt by divestiture of gas assets. In December of 2010 they reported the sale of $51.7 million. This was the first time RAM had debt lower then $200 million since 2007. This year they are targeting a mix of 66% oils/liquids and 37% natural gas. RAM will produce approximately 1.7 to 1.8 MMBoe. In Osage County, RAM has 56,320 net acres. This area is predominantly oil. RAM is a very risky play, but may have a high reward. Currently, its debt is very high at $197 million at the end of 2010. Over the past three years, RAM has reduced its debt by $139 million, and now has a much higher oil price to create revenue. RAM is selling itself on price/cash flow. This valuation is attractive only because its production is significant. Price to tangible book value looks expensive.
- P/E Ratio- 69.3
- Price to Sales- 1.3
- Price to Tangible Book- 34.61
U.S. Energy Corp. (USEG) could have tremendous upside. I have been following this name closely based on its Bakken assets. U.S. Energy Corp: A Play on Oil and Molybdenum is a more in depth article. This company has great assets as they are currently involved in:
- Two high impact Bakken drilling ventures
- An Eagle Ford oil window venture
- Five conventional drilling ventures
U.S. Energy is participating with quality partners helping to substantiate its acreages. It has 14 producing wells with Brigham (BEXP). This partnership has a 100% success rate. The participation agreement with Zavanna is for three wells over the next year. U.S. Energy has 6,200 net acres with Zavanna. The Eagle Ford acreage with Crimson Exploration (CXPO) will spud its initial well next month. Another initial well will spud in the San Juan Basin with Cirque Resources LP.
Total proved reserves increased to 1,954,941 in 2010 from 1,086,203 in 2009. This was an 80% increase. This year U.S. Energy has planned for 40 gross/13 net wells. Eighteen of the wells will be in the Bakken. Most importantly, U.S. Energy reported on March 15th that Brigham ran a micro seismic and found the area supports four Bakken and four Three Forks wells per 1,280 acres. If this proved correct, there would be a potential for 120 potential gross drilling locations in the Brigham program. U.S. Energy has further upside if its working interest with Zavanna produces the same four Bakken and four Three Forks wells, as opposed to the three and three planned currently. It seems the Eagle Ford position could offer further upside as estimates are for just this trend, without figuring further drill locations such as the Austin Chalk.
U.S. Energy's diverse portfolio includes a development molybdenum mine, real estate, and geothermal. U.S. Energy recently stated it will be monetizing geothermal investments. It is also planning to sell its 216 unit apartment complex. U.S. Energy plans to use this money to fund more oil and gas exploration and production projects. This stock continues to be one of my favorites through 2012.
- P/E Ratio- Negative
- Price to Sales- 5.6
- Price to Tangible Book- 1.26
Another favorite, Triangle Petroleum (TPLM), is an interesting play on the Bakken. I first covered this name in early February. Since then the stock has continued to move up. Triangle Petroleum: Speculating in the Bakken is a title that doesn't do this company justice. Since this article there have been some interesting changes in this name. Cambrian Capital recently bought 80,000 shares at an average price of $7.50 per share. Cambrian currently owns more than 10% of the company and purchased 800,000 shares last year in November at a price of $5.50 per share.
Triangle raised capital through a stock offering totaling $116.8 million. This coupled with current cash holdings raised cash to approximately $145 million. This cash is being used to develop its current Bakken holdings. Triangle currently has 30,000 net acres it purchased for approximately $2,600 per net acre. Triangle has 7,000 operated acres, and 23,000 non-operated acres. A one rig program will begin in the operated acres the fourth quarter of this year. It has more than 180 net unrisked locations. Its 12 month drilling program will drill 10.6 net or 75-plus gross wells. Also, $80 to $90 million will be spent on this program. This leaves about $45 million to add Bakken acres. Triangle plans to increase its 30,000 net acres to approximately 100,000 net acres. The entire Bakken program will be paid for with current cash, as cash from operations is not included. Triangle does another large asset in Nova Scotia. This 412,924 net acres does have additional value.
- P/E Ratio- Negative
- Price to Sales- 175.82
- Price to Tangible Book- 1.02
Miller Petroleum (MILL) may be ready to trade to the upside. About a year ago, this stock was on the minds of many on Wall Street. Miller was an oil and gas production company in Tennessee, but most of its production was gas. A Canadian company named Pacific Energy went bankrupt. Miller went after specific assets located at the Cook Inlet Basin. These specific assets were acquired by Pacific Energy from Forest Oil Corporation (FST). When all was said and done, Pacific Energy had invested approximately $500 million. Miller was able to pick what it wanted and paid $5 million for what is worth approximately $300 million now. The company was essentially able to leave behind properties, pipeline and $500 million debt. It received:
- $100 million of infrastructure
- 600,000 lease and exploration acres
- 10 wells producing 5,000 Boed
- Osprey abandonment liabilities
Miller will be able to increase production significantly going forward. It currently has drilling rigs headed to be mounted on the Osprey. Miller's has proven reserves of 10.4 MMBoe and total reserves of 49.1 MMBoe. Although there is some doubt that Miller has the money to do all required to increase production significantly. Even so, these assets are currently worth considerably more, and I would not be surprised if a bigger player will want Miller's assets, which may be cheaper to purchase the whole company, as its Tennessee gas assets are not worth near the Cook Inlet Property is.
- P/E Ratio- .6
- Price to Sales- 21.22
- Price to Tangible Book- .68
I would watch these names, as many of them could be a good addition to a portfolio. I am currently bullish on Triangle Petroleum, U.S. Energy and Credo Petroleum but all have upside at current oil prices. Be careful here, as some of these names could decrease substantially on decreased oil prices.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TPLM, USEG over the next 72 hours.
Additional disclosure: Source:2010 Financials from all companies listed. Source: Tengasco. Source: Credo Petroleum. Source: Triangle Petroleum. Source: US Energy. Source: Double Eagle Petroleum. Source: RAM Energy Resources. Source: Miller Petroleum.