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We recommend current purchase of the common stock of Whiting Petroleum (NYSE:WLL) as the leading nearly pure play on rising North Dakota oil production that may surpass that of Alaska, astonishing as that may have seemed just a few years ago.

The company is North Dakota’s second largest producer primarily on its discovery of the Sanish field, one of the two most important sources of new production to date. A forty-year independent oil entrepreneur with a conservative financial streak, Chairman James Volker got our attention with his analysis of the resource potential in the prime Bakken/Three Forks area of west central North Dakota and eastern Montana (see map below). Mr. Volker eyes the 8.4 million acres as providing for 39,000 wells on a spacing of six for each 1280 acre unit. Picking a mid-range 300,000 barrel reserve for each well, he sees almost 12 billion barrels recoverable, comparable in size to the Prudhoe Bay discovery that made Alaskan oil famous.

So far, WLL has booked 75 million barrels equivalent of proven and probable reserves for the Bakken and Three Forks area, which is about 24% of its corporate total. Putting the possible quantities aside, we justify an increase in estimated Net Present Value (NPV) to $90 a share from $75 on the basis of proven and probable reserves. Volume growth can fuel gradual appreciation in WLL stock. On a more speculative basis, the world continues on the road to $200 oil by November 2012 as it looks to us. Despite a doubling in stock price in the past 15 months, WLL offers competitive value by McDep Ratio and cash flow multiple.

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Originally published on April 15, 2011

Source: Whiting Petroleum: New Buy on Chairman Volker's Prudhoe Bay