Seeking Alpha
Long only, contrarian, special situations, value
Profile| Send Message|
( followers)  

The production ramp up in the Bakken reserve has been one of the most impressive developments in domestic energy production in a generation. Production has quintupled over the past five years to 500,000 BOE/day and North Dakota has surpassed Ecuador (An OPEC member) in oil production. This expansion is continuing as reserve estimates have grown exponentially. Continental Resources (CLR) CEO Harold Hamm believes the basin may have over 24 billion barrels of recoverable oil.

One stock that rode this wave but still has significant upside is Northern Oil & Gas (NOG).

Northern Oil & Gas - "Northern Oil and Gas, Inc., an independent energy company, engages in the acquisition, exploration, development, and production of crude oil and natural gas properties primarily in the Bakken and Three Forks formations within the Williston Basin in North Dakota and Montana". (Business description from Yahoo Finance)

Seven reasons NOG has plenty of upside left from $20 a share:

  • For fiscal year 2011, production growth of 117% was achieved by Northern Oil & Gas.

  • The stock has dropped some 25% over the past couple of months primarily due to concerns over dropping natural gas prices. However, 89% of NOG's reserve base is oil, not natural gas.

  • The company was producing under 1,000 BOE/Day in Q3 2009 and is currently producing 7,000 BOE/Day.

  • The company has rapid revenue growth ahead of it. The company had under $160 million in revenues in FY2011, but analysts project almost 100% growth this year to $336mm in sales and revenues of $443mm in FY2013.

  • The median price target for the 11 analysts that cover Northern Oil & Gas is $31, some 50% above the current stock price.

  • It has a low five year projected PEG (.44) and is cheap at just over 10 times forward earnings.

  • Given its small market capitalization ($1.3B), huge production increases and 170,000 acres in the Bakken; the company could easily become a takeout target.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NOG over the next 72 hours.

Source: Northern Oil & Gas: Play The Massive Production Ramp Up In The Bakken