5 Oil Stocks You Want to Know - Barron's

Oil prices of $100/barrel have drillers aggressively exploring North Dakota's Bakken Shale. Despite impressive recent gains, Barron's says shares of companies with stakes in the area still have upside potential.

The Bakken boom is still young, so much so that local restaurants are having a hard time hiring new staff due to the sudden surge in demand for youthful laborers. One company, Whiting Petroleum (WLL), has dug three successful wells at Lake Robinson, the third of which is producing 2,530 b/d -- 53% more than the second. Whiting plans to drill at least 30 wells this year alone. Jefferies analyst Biju Perincheril says shares ($57) are worth $66, and that's before assigning a value to Lake Robinson.

"The newness of the [Bakken] play has analysts giving credence only to acreage that has been drilled successfully," portfolio manager David Morehead says. "We do not believe the street has fully valued the Bakken drilling that has already been permitted, let alone the Bakken acreage held in portfolios that has yet to be permitted and drilled."

Other companies with operations in the area include EOG Resources (EOG) [11% of its assets leveraged to the area]; Brigham Exploration (BEXP) [16%]; and Continental Resources (CLR) [33%]. Marathon Oil (MRO) is also moving aggressively into the region.

Comments

[NormanLepoff, M.D.]

Mr. Hoffman writes good articles. As a matter of fact, the same goes for seeking alpha in general.

[Philip Meyer]

In trying to capture what the Bakken shale play can mean to Brigham Exploration (BEXP) I am reminded of the little boy who was found madly digging into a pile of horse manure. Asked what he was doing the little boy said "With all this horse ---- there's bound to be a pony some place around here". Suffice to say, Brigham has the potential to find a lot of ponies given its steadily increasing Bakken position, now totally over 200,000 net acres. Relative to share price, Brigham's Bakken exposure is potentially staggering. Conservatively, the company's position should lead to a doubling of reserves over the next two years. Longer term, its Bakken exposure has the potential to increase reserves an order of magniture or more if Leigh Price's resource assessment of the "Bakken Source System" proves as reasonable as it is exhaustive" (a). Using Price's low-end estimate of 271 billion barrels of Bakken oil-in-place and a 10% recovery factor , Brigham's position could generate some 11 barrels of reserves per share. This jumps to 20 barrels per share using using Price's high-end estimate of 503 billion barrels of oil-in-place. Increasing the recovery factor to 20%, not unrealistic over time given the learning curve improvements typical of resource plays, reserves could again double to 40 barrels per share. Assuredly, there will be slips between the lip and the cup, as has already been the case. On the other hand, given the enormous size of the cup there is a huge margin for error.

[paulk8756]

Mr. Meyer,

How do their potential reserves per share in the Bakkens stack up against the reserves per share of other publicly traded oil companies, if I may ask?


On Feb 26 03:16 PM Philip Meyer wrote:

> In trying to capture what the Bakken shale play can mean to Brigham
> Exploration (BEXP) I am reminded of the little boy who was found
> madly digging into a pile of horse manure. Asked what he was doing
> the little boy said "With all this horse ---- there's bound to be
> a pony some place around here". Suffice to say, Brigham has the potential
> to find a lot of ponies given its steadily increasing Bakken position,
> now totally over 200,000 net acres. Relative to share price, Brigham's
> Bakken exposure is potentially staggering. Conservatively, the company's
> position should lead to a doubling of reserves over the next two
> years. Longer term, its Bakken exposure has the potential to increase
> reserves an order of magniture or more if Leigh Price's resource
> assessment of the "Bakken Source System" proves as reasonable as
> it is exhaustive" (a). Using Price's low-end estimate of 271 billion
> barrels of Bakken oil-in-place and a 10% recovery factor , Brigham's
> position could generate some 11 barrels of reserves per share. This
> jumps to 20 barrels per share using using Price's high-end estimate
> of 503 billion barrels of oil-in-place. Increasing the recovery factor
> to 20%, not unrealistic over time given the learning curve improvements
> typical of resource plays, reserves could again double to 40 barrels
> per share. Assuredly, there will be slips between the lip and the
> cup, as has already been the case. On the other hand, given the enormous
> size of the cup there is a huge margin for error.

[bakken2008]

Barron is covering Bakken more than ever, hopefully it isn't a kiss of death

RD
www.bakkenstocks.com

[scooter-pop]

Now a formation below the Bakken presents itself:Jon S. Brumley, Encore's Chief Executive Officer and President, stated, "We are very pleased with the initial results from our first well drilled in the Sanish Formation. The well came on strong with an IP of 1,106 BOE per day. We currently hold large acreage positions in several prolific areas of the Sanish. Based on the results of our first Sanish well and other wells that we have drilled in the Bakken Formation, this play is proving to be a significant source of incremental reserves and production for the Company and results continue to outpace our expectations."