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Energy has lagged other sectors in the short term and we could continue to see this as the problems in Europe unfold. There is little that can be done about the macro environment, and I would advise investors to take their time in making investment decisions. I do not recommend picking bottoms, as most investors will jump all in too early, or worse wait too long and miss the upswing altogether. I do not believe the worst is over, as we will probably get more bad news in the coming months.

Recent fears were increased as WTI price projections have been pulling back. In my opinion, Raymond James' belief that WTI will average $65 in 2013 is low. But it was one of the first out being bearish natural gas. That said, many of the Bakken names are well hedged through 2013, and even in the worst case scenario, should still be viable. That said, the Bakken names are beginning to sweat as margins are beginning to tighten. The Saudis seem content to keep pumping 10 million barrels, when the market seems to only need 8.5. This coupled with no new quantitative easing in the United States, could continue to push the price of oil downward.

The Bakken names are on sale, and recent well initial production announcements could be bullish for specific companies. Kodiak Oil & Gas Corp. (NYSE:KOG) recently announced well results from its Truax Field. This is part of Kodiak's recent acquisition of acreage in southeastern Williams County, or better known as the Polar Prospect. The company may have 'stolen' this acreage, given this new information (see below).

The picture above shows the current prospects Kodiak is working on. Before its recent acquisition of acreage in northeastern and southeastern Williams County, its best operated wells had been in the Koala Prospect. It could be argued that Kodiak's Koala results were even better than Brigham's (NYSE:STO) in Alger Field of Mountrail County, and is certainly better than Whiting Petroleum Corporation's (NYSE:WLL) results in the Sanish Field and EOG Resources, Inc.'s (NYSE:EOG) Parshall Field.

For now, we do not know for sure whether the very good Koala results were due to operational expertise, the geology of the area, or a combination of both. One well result to watch is Whiting's Tarpon Federal 21-4H. This well has been by far the best in the Bakken with respect to its 24-hour IP rate. It produced 4,815 barrels of oil and 13,163 Mcf on the first day. This well was approximately 17 miles northeast from Kodiak's best wells in the Koala Prospect.

Kodiak has had great success in the Koala Prospect. Here are those results:

Koala Well Results
Well Name Length IP Rate (Boe/d) 30-Day IP 90-Day IP Choke GOR Stages Flow Tube PSI
Koala 9-5-6-12H3 9172 2327 1072 980 36/64 1300 22 1400
Koala 9-5-6-5H 8968 3042 1377

1103

36/64 1250 24 1800
Koala 3-2-11-14H 9452 3412 1337 1142 36/64 1250 24 2538
Koala 3-2-11-13H 9500 3021 1144 897 36/64 1200 21 1787
Koala 2-25-36-16H3 7514 2844 1115 752 33/64 1650 25 1941
Koala 15-31-30-2H 9460 2971 Conf. Conf. Conf. Conf.
Koala 15-31-30-3H 9629 3117 42/64 1253 28 1690
Koala 2-25-36-15H 9177 2709 N/A N/A N/A N/A

Kodiak only has two Polar Prospect (Williams County) operated results, as all of the others were drilled and completed by the previous operators of this acreage. The most recent well completions by operators before Kodiak are:

Non-Kodiak Polar Prospect Wells
Well Name Length IP Rate (Boe/d) 30-Day IP 90-Day IP Choke GOR Stages

Flow Tube PSI

Long 112 1H 9583 1978 1017 1250
State 1621 1H 8926 1658 525 418 32/64 1050 18 1229
Mildred 94 1H 10041 1396 496 412 950
King 3-8H 7620 1673 703 28/64 2000 16 2175
Lind 211 1H 9563 1419 704 1250
Pankowski 4-6H 8860 1588 830 32/64 1800 23 1522

Recently, Kodiak reported the results of its first two operated Polar Prospect wells. These wells had much better results than those operated by the previous producers. The two wells could even be better than those drilled in the Koala Prospect.

Kodiak Operated Polar Prospect Wells
Well Name Length IP Rate (Boe/d) 30-Day IP 90-Day IP Choke GOR Stages Flow Tube PSI
Thomas 154-98-15-33-28-2H 9277 4021 1551 42/64 2000 34 2500
Thomas 154-98-15-33-28-1H3 9373 3021 1159 Conf. 1500 Conf. Conf.

The two Polar wells above give a good indication of the types of results to expect going forward. It also shows the improvements garnered from 34 stages. These results indicate that we will continue to see increased demand for water and proppant. More importantly, Kodiak was able to accomplish this with only 34 stages, as other operators are having success with 40-stage fracs.

In summary, Kodiak continues to improve its well results. It is ahead of the curve in the Bakken and the main reason has to do with water and proppant. By using a much larger amount, it has been able to produce completions that are significantly better than its competition. Right now, it is difficult to know how good the most recent Polar wells are as I prefer to see the 90-day IP rate before making too many assumptions. Nonetheless, these two wells seem to be at least as good if not better than any wells Kodiak has seen to date. Kodiak has had a cost per well of $10.5 million, so we will want to watch this closely going forward. Kodiak seems cheap at this price, but I would exercise some caution with all of the oil exploration and production names.

Saudi Arabia continues to produce 10 million barrels/day, when the market supports 8.5. It would not be strange if it continues to pump at this rate as it is putting pressure on Iran, but this process is also shrinking margins of oil producers in unconventional US plays. A strengthening dollar is also troublesome to the price of oil. The oil market may get some relief via hurricanes in the Gulf or a military strike on Iran so we could see some choppy oil markets going forward.

Lastly, I have received a large number of emails asking how I am playing this market. Currently, I have sold all of my stock in oil and gas exploration companies. This is a short-term play, as I am looking for value in several names. In the Bakken, I do like Kodiak and Triangle Petroleum Corporation (NYSEMKT:TPLM). Both have had very good individual well results that I believe will continue to improve. Other names I am looking at are Berry Petroleum Co. (NYSE:BRY), Bonanza Creek Energy (NYSE:BCEI), and Gulfport Energy Corporation (NASDAQ:GPOR).

Source: Bakken Update: A Look At Kodiak's Recent Well Results

Additional disclosure: This is not a buy or sell recommendation.