Oil and natural gas account for more than 60% of our energy in the United States. The U.S. is the world's third- largest producer, with more than 500,000 producing wells that produce almost 2 billion BOE per year. Currently 25% of this production is offshore while the remainder is produced on shore. Within the United States 31 states produce Crude Oil, while 33 states produce Natural Gas. Unconventional natural gas via Coal bed methane and shale gas, have increased in activity through the years. As a micro cap investor, I’m mainly drawn to the smaller oil and gas producers with strong production profiles that have properties in the most prolific fields. Here are a few oil & gas micro caps that we’ve been discussing at MicroCapClub.
American Standard Energy Corp (ASEN.OB), $3.60 PPS, $142m market cap: American Standard was formed about a year ago to basically buy-acquire all the assets of Randall Capps (i.e.: XOG Group). In the last 12 months, ASEN has acquired several producing properties from the XOG. The company exited Q3 producing 790 BOEPD up from 50 BOEPD a year ago. ASEN expects to be at a 2,000 BOEPD production rate in a few months. The company has raised $48 million via equity during 2011, and has secured a $300 million credit facility to continue to push the accelerator into 2012. The company controls 40,100 net acres in the Bakken/Three Forks, Permian, and Eagle Ford formations. American Standard currently has letter of intents to purchase an additional 80,000 net acres across the Eagle Ford shale formation, Niobrara shale formation, and the Mississippian shale formation. The company also recently signed a letter of intent to acquire Cross Border Resources (XBOR) which owns 300,000 net acres across numerous formations in New Mexico. ASEN is quickly and quietly turning into a real force to be reckoned with. The company has an aggressive capital budget, spending $50 million on drilling alone in the second half 2011, and expected to spend $150-200 million on drilling and acquisitions in 2012. Two analysts cover ASEN with an average price target of $8.00.
Synergy Resources Corp (SYRG.OB), $3.40 PPS, $120m market cap: Synergy Resources (SYRG.OB) is a well capitalized emerging oil and gas producer focusing on the Denver-Julesburg Basin (D-J Basin). The D-J Basin is considered a “Legacy Top 10 U.S. Field.” The Wattenberg Field (in the D-J Basin) in late 2005, changed to 20 acre spacing which, was estimated to add an incremental 1.6 trillion cubic feet of recoverable reserve base. Chesapeake Energy (CHK), Noble Energy (NBL), EOG Resources (EOG), and Anadarko Petroleum (APC) are a few of the large independents active in this area. Of much interest is the Niobrara shale formation (in the D-J Basin), which could be a prolific horizontal resource. Synergy Resources operates approximately 116,000 gross acres (100,000 net) in the D-J basin. Production increased 135% to 605 BOEPD in Q3 2011, up from 257 BOPD in Q3 2010. Three analysts cover SYRG with an average price target of $5.92.
Voyager Oil & Gas Inc. (VOG), $2.40 PPS, $140m market cap: Voyager Oil & Gas, Inc. is an exploration and production company based in Billings, Montana. Voyager's primary focus is oil shale resource prospects in the continental United States. Voyager currently controls approximately 143,000 net acres in the Bakken/Three Forks (32k), Niobrara (10k), Heath Shale (33k), and Tiger Ridge (67k). Production for Q3 2011 averaged 370 BOEPD, up from 200 BOEPD in Q2 2011. The company expects to exit 2011 around 1,000 BOEPD, and exit 2012 at 3,500 BOEPD.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.