Which Companies Have The Most To Gain (And Lose) In The Bakken?

Includes: CLR, KOG, OAS, TPLM, WLL
by: Matt King

The Bakken and Three Forks Plays in Western North Dakota and Eastern Montana continue to break oil and gas production and rig count records, as shown in the latest director's cut released by the North Dakota Department of Mineral Resources. The continuing conversation with regard to increased production (558,254 barrels per day from 6,726 producing wells in February) is the depressed well-head price for North Dakota Crude. The April 11th sweet crude price at the well-head in North Dakota was $76 per barrel while NYMEX-WTI was selling for 25% higher and Brent selling for 19% higher than WTI. This is a significant spread which allows E&P or midstream companies, who have an aptitude for logistics, to capitalize on the Brent price in the LLS market by using alternate forms of transportation.

Many investors are curious as to what E&P companies they can invest in to be able to capitalize on the rapid development in the Bakken. Below is a list with a few comments about each firm which has a significant portion of its operations and assets in the Williston basin of Eastern Montana and Western North Dakota.

Oasis Petroleum (OAS) is a pure Bakken/Three Forks E&P. Oasis holds all of its net 307,000 leasehold acres in the Bakken region. The company is currently operating seven rigs in North Dakota and had an average daily production of 10,724 BOE per day in 2011. From 2010 to 2011, Oasis saw a significant growth in Assets of just over $1 billion and produced a net income of $79 million compared to net losses during the two prior years. The company still has great prospects for growth with more than 1300 identified drilling locations - not counting other potential infill and production drilling that may occur.

Whiting Oil and Gas (WLL) is a heavily-focused Bakken/Three Forks E&P which holds over 682,000 net acres and continues to add to that position. Whiting was a front runner in the early days and has paid an average of only $432 per net acre for its leases. For 2011, Whiting produced an average of 38,700 bpd in North Dakota. Whiting's assets grew approximately $1.5 billion from 2010 to 2011 while net income grew $218 million. Like Oasis, Whiting has a significant road to growth ahead with 2,264 drilling locations in the Bakken and is currently operating 15 rigs in North Dakota.

Continental Resources (CLR) is notably one of the most reviewed companies on the internet in regards to the Bakken. The largest leaseholder and producer in the Bakken is not without its growing pains. Operating 21 rigs in the Williston Basin, with the infrastructure limits in the region, has taken a large team of very talented people and committed suppliers. Continental has approximately 850,000 net acres leased in the Williston Basin. Continental produced an average of 52,147 barrels per day in 2011, grew assets by $1.2 billion, and increased net income by $97 million. Continental has growth prospects in Bakken drilling with 840+ gross locations, but has the largest producer, operator, and leaseholder been overrated?

Triangle Petroleum (TPLM) is a smaller E&P in the Bakken with 83,000 net acres prospective for the Bakken/Three Forks in the Williston Basin. Triangle is a primary Bakken player except for its significant acreage in Nova Scotia. According to Triangle, based on its increased focus on the Williston Basin, Nova Scotia may be divested. Triangle currently operates two drilling rigs in North Dakota and has taken upon itself to make sure it has fracturing services. Triangle developed a separate entity, in which it owns the majority share, to carry out its well completions. Triangle has subscribed to 50% of this entity's capacity with the remaining to be sold to other E&P's. This move will help the smaller players, which do not have the high rig count to get attention from Halliburton (NYSE:HAL) etc, to make sure their assets do not sit idle for extended periods of time. At the end of 2011, Triangle had grown total assets by $148 million and increased its net loss by $3 million to a total net loss of $23.8 million. Triangle has identified 17 additional drilling locations - not including infill and production drilling potential.

Kodiak oil and Gas (KOG) has significantly grown over the last 18 months by strategic acquisitions and production. Kodiak currently holds 155,000 net acres, operates six drilling rigs in North Dakota, and produced just under 7,000 bpd average in 2011. In 2011, Kodiak grew assets by $1.3 billion to $1.7 billion - an extreme increase. Also in 2011, Kodiak reported a positive net income of $3.8 million compared to two prior years of net losses. Kodiak has a long way to go to develop its acreage with only 37% of the 155,000 acres having been developed so far.

The companies listed above have a significant stake in the Bakken/Three Forks. If you are looking to get into companies, with the majority of their assets and operations in the Bakken, take a closer look at these E&P's.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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