Seeking Alpha

Bruce Vanderveen's  Instablog

Bruce Vanderveen
Send Message
The Federal Reserve has pegged interest rates to all time lows. This leaves income investors in a quandary - not knowing where to invest. Bruce looks at the best income, growth, natural resource, and technology equities while taking a contrarian approach. ETFs can often be used to mitigate risk... More
My blog:
web-sage.com/wordpress
  • 3 Speculative Mississippi Lime Micro Caps To Consider 0 comments
    Mar 3, 2012 8:03 AM | about stocks: AAPH, EQU, OEDV, SD

    What is the hottest oil play in North America? Steve Antry, CEO of privately held Eagle Energy says it is the Mississippian limestone of northern Oklahoma and southern Kansas. This formation is an old field - Phillips Petroleum was in the area 100 years ago. What is new is the large amounts of remaining oil now being collected thanks to horizontal drilling and hydraulic fracking.

    An American Association of Petroleum Geologists write-up claims Mississippian wells cost less than $2.5 million each but can produce hundreds of barrels of oil equivalent a day and have an estimated ultimate recovery of up to 400,000 barrels per-well .

    Everyone knew oil was there. Trouble was, in the past high water content and complex geology made finding it a hit or miss proposition. Now, with horizontal drilling and multistage fracking, dry holes are rare.

    As I noted in an earlier article, SandRidge Energy (NYSE:SD) has staked out a major position in the formation. Chesapeake Energy (NYSE:CHK), Range Resources (NYSE:RRC), and Devon Energy (NYSE:DVN) also have major holdings.

    Here, I will briefly profile 3 micro caps which have acreage in the Mississippi Lime. These companies are very speculative so do considerable due diligence before investing.

    Equal Energy (EQU)

    Equal Energy has a market capitalization near $132 million and has approximately 20,000 net acres in the Mississippi Lime. Current share price is under $4. Yahoo Finance shows revenue at $4.03/share, book value of $7.03/share, and total debt at $223 million.

    In addition to its Mississippi acreage Equal has a geographically diverse array of assets which include Canadian oil and liquids rich gas from Oklahoma's Hunton formation. These legacy assets seem to be undervalued (stock price is 55% of book value). Its not yet drilled Mississippian acreage could potentially be very profitable.

    Equal has a troubled past, a past - which may now be behind it. Seeking Alpha author and investor Nawar Alsaadi has written an article which goes further into the company's history and assets.

    Osage Exploration (OEDV.OB)

    This small, debt free company has a market capitalization of $32 million. Current share price is around $.68. Yahoo Finance shows revenue at $.06/share and a book Value of $.09/share.

    Osage is partnering in the Mississippi Lime with Slawson Exploration and U.S. Energy Development Corporation (USEDC) - both well established companies. Slawson has drilled over 3500 wells in 10 states. Osage is financing drilling by granting Slawson a 42% interest and USEDC a 30% interest. Osage retains a 25% non-working interest for a net 5,000 acres. The partners recently spudded their first two horizontal wells in the Mississippian.

    Osage is a nearly pure play (It also has interests in Columbia.) on the Mississippi Lime. The focus now, however, is on the Mississippian. Osage's stock, which sold for $.08 a year ago, has gone up nearly 10 fold.

    American Petro-Hunter (AAPH.OB)

    American Petro-Hunter has a market capitalization around $6.8 million and a share price of $.24. Yahoo Finance shows revenue of $.01/share and book value at -$.08/share. Total debt is $3.5 million.

    According to its website American Petro-hunter has nearly 6,000 acres of land holdings in the Mississippian (I could not find net holdings.) Its third well has just entered the completion phase. American Petro-hunter also has other producing fields in Oklahoma and Kansas.

    Summary

    All the above companies have high hopes for their Mississippi acreage. Equal Energy is the most diversified and established. Osage Exploration and American Petro-Hunter have pretty much staked their future to the Mississippi Lime and may thrive or falter depending on production results there.

    Is the Mississippi Lime the hottest play in the U.S? Well, that's debatable. What does seem obvious though, is how productive horizontal drilling and multistage fracking have become. Not only are shales like the Bakken being successfully fracked but now we also have older, carbonate fields such as the Mississippi Lime roaring back to life. This all bodes well for future U.S. oil production.

    Disclaimer: This article is informative only - not buy or sell advice. Do your own research and due diligence before investing.

    Disclosure: I am long EQU.

    Themes: quick-picks-lists Stocks: AAPH, EQU, OEDV, SD
Back To Bruce Vanderveen's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.