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The year 2012 could be a big one in the Bakken. Many of these names are cheap based on $100 oil, and if there is some certainty gained from Europe, these names will carry a higher valuation. The price garnered from Bakken oil will trade higher as demand in the United States rebounds. More importantly is the pipeline from Cushing to the coast. If and/or when this is completed, WTI will trade closer to Brent, and Bakken oil will trade with WTI. Looking at the Bakken names, several look good through next year. Last year was a good year, starting with Samson (NYSEMKT:SSN). On January 17th, I wrote Samson Oil & Gas: Currently Undervalued Even In The Most Pessimistic Scenario. Samson was trading for $1.95/share and in two months it hit a high of $4.75. Brigham was the second name I was bullish on, which was purchased by Statoil (NYSE:STO). More recently, Kodiak Oil & Gas (NYSE:KOG) has been a big winner. This stock dipped below $4/share in early October, and recently made a new high of $9.95. All three of these names performed well in 2011. So which Bakken names have upside this year?

When looking for stock appreciation, as a general rule, smaller companies are able to grow faster than larger competitors. Production growth is very important to oil producers, as the more oil produced, the greater the cash flow. And the greater the cash flow, the more revenue to drill more wells. Companies that have little to no production can grow production significantly faster.

Triangle Petroleum (NYSEMKT:TPLM) is one of these companies. Its third quarter results were very good, as its non-operated program produced better than expected results. Triangle's two best non-operated wells were operated by Newfield (NYSE:NFX). These wells had IP rates of 3034 Boe/d and 2370 Boe/d, with working interests of 12.84% and 23.44% respectively. The majority of its non-operated wells are in or around Whiting's (NYSE:WLL) Hidden Bench prospect. This is to the southwest of Kodiak's Koala acreage. Of the five producing wells Whiting has completed in Hidden Bench, there has been an average initial production rate of 2669 Boe/d. Results have been inconsistent from one operator to another, although operators have been able to get consistently better results as they complete each well. Going forward, there are two important Slawson wells waiting on completion:

  1. Crossbow 1-7-6H (17.92% Working Interest)

  2. Condor 1-36-25H (17.91% Working Interest)

The other well of interest is the:

  1. Stewart 5200 12-29H (31.41% Working Interest)

This well is operated by Oasis (NYSE:OAS) and could have results as good if not better than the Newfield wells mentioned earlier in this article. Not only has Oasis shown an improvement in well results over the past year, but also has some very good acreage, specifically in Indian Hills. In summary, Triangle seems undervalued given its acreage. Look for Triangle to have a very good 2012.

Oasis seems to have turned the corner and could be a big story in 2012. For those who follow my articles, you know I was not a proponent of this stock in 2011. Given its drilling results and new oil service company, I think it is well placed. It has 303000 net Bakken acres, and a drilling inventory of over 1300 locations. I don't think this company is the next Brigham, but it has upside from its current valuation. It currently has nine operated drilling rigs, and with the nice weather in North Dakota, it should be ahead of schedule.

East of Nesson, Oasis has acreage broken into two locations. The first is St. Croix and the second Cottonwood. Cottonwood is located in northwest Mountrail County and extends into southern Burke. St. Croix is located in Burke County. Oasis has a total of approximately 103000 net acres east of Nesson. Only two of its nine operated rigs are working this play. It has 19 producing, four waiting on completion, and two wells currently being drilled. Here are some of Oasis' wells producing in Mountrail County:

  1. Ruud 5493 42-23H: IP rate of 1592 Bo/d (Produced 39826 barrels of oil in 96 days of production)

  2. Berry 5493 11-6H: IP rate of 2023 Bo/d (Produced 110434 barrels of oil in the 403 days)

  3. Oasis Meiers 5692 11-19H: (Produced 4215 barrels of oil in 88 days)

  4. Manhattan 5792 11-2H: IP rate of 889 Bo/d (Produced 69853 barrels of oil in 345 days)

Its best wells east of Nesson are in its Alger and Robinson Lake fields. West Williston is an area with significant upside. It is divided into four areas. The first is Hebron, which is located in Richland County, Montana. The second area is Red Bank, which is in Williams County. Third is Mondak, which is located in southern McKenzie County. The area with the most upside is Indian Hills. These wells have been coming in at the top (700MBo) end of Oasis' range. Camp field is located in Indian Hills, and one of its most recent wells are:

  1. Sparrow Federal 5201 42-11H: IP rate of 2825 Bo/d (Produced 77018 barrels of oil in 133 days)

This is a very good well and gives an idea of the upside to this acreage. Indian Hills is located to the northwest of Kodiak's Koala 9-5-6-5H. These wells have caused all the excitement about Kodiak's acreage. Koala Bakken and Three Forks EURs range from 900Mboe to 1100Mboe. To the north of Indian Hills, Brigham's State 36-1#2H is a Three Forks well with an IP rate of 2356 Boe/d and a 60 day IP rate of 696 Boe/d. Increased production is a good reason to own Oasis, but there are others just as important:

  1. Infrastructure: Gas and liquids gathering is completed in all of its best prospects. Crude oil gathering and salt water disposal are completed in Indian Hills, Red Bank, and Hebron.

  2. Oasis Well Services: New oil service company that will save approximately eight hundred thousand to one million dollars per well, with up to 20 wells completed per year.

  3. Increased frac stages: 30% increase in frac stages are producing 20% to 30% increases in EURs.

In summary, Oasis is well placed going into 2012, and has less risk than Triangle. As it begins to do more pad drilling, we should see costs come down. If this company can continue to improve as it did in the third and fourth quarters of 2011, it will see significant price appreciation.

Disclaimer: This is not a buy recommendation.

Source: Bakken Update: What To Buy In 2012