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Lorenzo De Plano
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Lorenzo De Plano is an active trader/investor in both tech-based and Foreign companies and stocks. His involvement in stocks is derived from his prior years of experience as a trader as well as his knowledge of the tech industry, international affairs, economics, and politics.
  • Will North Dakota's Growth Continue To Affect CLR? 0 comments
    Jun 10, 2013 5:31 PM | about stocks: CLR

    Last Thursday, the state of North Dakota reported an increased 2012 economic growth rate of 13.4%, which was posted by the Bureau of Economic Analysis. This is the third consecutive year of consistent growth for the northern state, which is currently growing more than quadruple the national average: 2.7%. The reason for North Dakota's sudden boom in its Gross Domestic Product (NYSE:GDP) can be attributed to a surge in oil production now made available due to advancements in drilling technology. Such advancements include the highly controversial method of hydraulic fracturing, which has been the center of many political debates in Washington due to its devastating environmental impact. With this new technology, oil production is now more than six times higher than it was in 2007. However the question that remains is whether or not this growth will sustain itself.

    The main source of North Dakota's oil derives itself from the Bakken Shale, an underground rock formation that resides in the northwestern region of North Dakota. Because of the Bakken Shale, as of 2012 North Dakota has now become the second largest oil producing state in the nation. That being said, oil companies centralized in the region such as Continental Resources Inc. (NYSE:CLR), which is currently the biggest producer of crude oil and natural gas from the Bakken reserve, will be there to reap the reward in coming years.

    Among analysts forecasts Continental Resources Inc. is considered to be highly undervalued. With 16 analysts rating it a strong buy, 2 expecting it to outperform, and seven rating it a hold, Continental Resources Inc. displays bullish financial support in its favor. The company is currently still undervalued and its median target price alone for the next 12 months is expected to be $100 a share. That being said, it might be time to take up a position in the Bakken Shale as well as strengthen previous positions. In the last six months Continental Resources Inc. has seen strong insider buying in particular by the COO of the company. In addition Billionaire Steve Cohen from SAC Capital Advisors has increased their holding to a total of 1.6 million shares. However rumors of the Permian basin natural gas and oil production slowing have become increasingly more prominent in the media recently.

    The key to increased North American oil extraction resides in the drilling of horizontal wells. In a recent poll of energy experts at an energy convention in Texas, the vast majority of them have found that the Bakken appears to be slowing down in comparison to the production growth occurring in Eagle Ford Shale (another oil reserve in the southern United States that has exploded in recent years). However other experts contend that the growth will sustain itself and that it will remain at the peek of oil production in the next ten years within the United States. This schism outlines divisive attitudes pertaining to the Bakken and the energy companies that currently operate there. Regardless of differing opinions everyone agrees that North Dakota has become a juggernaut in the energy field and will continue to grow in the energy sector of oil production substantially in the coming years. My recommendation is to acquire a position in CLR and see where it may go in the next twelve months.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CLR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: CLR
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