Following Samson's Footsteps, More Exploration and Production Companies to Consider

by: Michael Filloon

Samson Oil and Gas (NYSEMKT:SSN) has had some very bullish price movement over the past few days. This company recently presented at the Enercom conference on February 23rd. Since then this stock is up from $2.77 to $3.77 in roughly a week's time. I profiled this stock on January 17th of this year. I wrote the story after reading the Enercom research report posted on Samson's company website. It should be noted that the Enercom report stated at the time that Samson could be valued between $3.30 and $11.57.

After Samson presented at the IPAA OGIS conference I wrote this piece as Mr. Terence Barr covered some of the information on Samson's holdings in the Niobrara and gave three scenarios for total oil recovery. The first estimate was done by Robert Coskey and estimated 10.9 to 21.9 million bbls net to Samson. The second estimate was done by Samson and it estimated 36.1 million bbls net to Samson. The third estimate was by Chesapeake (NYSE:CHK) and estimated 109 million bbls net to Samson. Samson estimated by its estimates it would translate to NPV10 $8.21 per ADS. Obviously if Chesapeake is correct the amount of recoverable will triple, and thus reward the shareholders more.

Samson has had a great run. This stock is up 219% over the last three months and 776% over the past year, and although this is not something easily duplicated, there are other small oil and gas exploration and production companies that have seen a very nice bounce recently. Some would say some of these names are on the move because of high oil prices and traders are speculating this will continue into the future. Whether this is or isn't true I thought I would briefly cover these names, to at least help others create a watch list.

Double Eagle Petroleum Co. (NASDAQ:DBLE) has almost doubled in that last month. This company is a play on the Niobrara (remember different area), as Samson is. Double Eagle has 70,000 net acres and is planning to drill one test well this year. A very important note, Double Eagle's asset is in the Atlantic Rim that is approximately 200 miles from where Samson/Chesapeake/Halliburton (NYSE:HAL) are. Also, Double Eagle is the 12th largest coal bed methane producer in Wyoming, so this company is not to be valuated like a company with substantial liquid reserves. At the end of the third quarter of 2010, gas was 97% of the business. This company also has a pipeline-based income. On February 22nd of this year, Brookfield Asset Management upgraded the company from hold to buy based on third quarter earnings. It seems that Double Eagle is maintaining a profit. This company could have significant upside if its Niobrara holdings are oily, but this is a play on speculation.

Credo Petroleum (NYSEARCA:CRED) is another company flying under the radar. It seems Credo is worth a look. I covered this stock in February because they have a very good story. Starting in 2006 and lasting a decade, Credo appreciated its stock price from around a half dollar to $30. It seems they were a natural gas company with Calliope, a natural gas recovery system. Since then they have converted to oil in quick fashion, with a 150,000 gross acreage in Kansas and 7,200 gross acreage in the Bakken. They also have another 70,000 acres in Western Oklahoma and the Texas Panhandle that Credo has stated will start to drill as soon as gas prices improve. In January, Credo completed its third Bakken well. This created a large spike in stock price from around $8 to $12.

Fieldpoint Petroleum Corporation (NYSEMKT:FPP) has had a nice trading range since March 2nd of 2009. This stock has moved up from a low of $1.28 per share and now trades at just under $5 per share. Fieldpoint has 304 gross producing wells (82.53 net). They are currently the operator of 59 of these wells. This company has been actively buying back shares which total 810,000 at an average cost of $1.86 per share. Since the stock has ripped it seems this was a very good business decision. Fieldpoint recently expanded its debt cap to $10.5 million in December. Fieldpoint has a combination of oil and natural gas wells through Texas, New Mexico, Louisiana, Wyoming and Oklahoma. It also recently purchased a 440 to 800 acre play in the Bakken for $155 per acre. Fieldpoint is currently profitable, and by its new Bakken position seems to be going after oil. This is another speculative name that I would be careful owning, but since they are making a profit, this may not be a bad name to take a chance on.

Pyramid Oil Company (NYSEMKT:PDO) is another name that recently popped. On February 15th, this stock was trading at $5.29 and now is sitting a little over $8. On November 15th, 2010, Pyramid reported some very good results with operating income up 161% and net income up 78%. Pyramid currently has base assets in California and Texas. This company is optimistic about its position in the Eagle Ford and is currently drilling new wells in its core California properties.

Blue Dolphin Energy Company (OTCQX:BDCO) has gone through the roof. On February 16th, 2011, Blue Dolphin was trading at $2.40 per share and now is almost $8. In December Blue Dolphin rectified problems that were threatening a delisting from the Nasdaq. This company currently operates pipelines. It also operates as an oil and gas exploration and production company. Blue Dolphin is currently interested in increasing its oil assets.

Mexco Energy Corporation (NYSEMKT:MXC) currently trades at a little over $17 per share. This is an increase from February 18th when this stock was $7.79. Mexco is an oil and gas exploration and production company engaged in assets within the United States. Mexco will generally seek out areas and obtain leases for the purpose of exploration. Historically this company has focused on natural gas reserves. On August 17th, 2010, this company acquired the royalty interest in 5,120 gross acres covering eight sections in the Haynesville trend. The operators in this area are PetroHawk (NYSE:HK) and Chesapeake. This stock is also speculative, and
seems to have significant momentum traders in the name.

Earthstone Energy Inc. (NASDAQ:ESTE) is a name that I own. This one seems to have reason for recent activity. In March 12th, 2009, this name traded for $5.50 and now is trading at almost $25. On November 29th, 2010, this stock was at $10.60 and then popped on high volume to $16.50. On February 22nd of this year the stock popped again. A recent article on Seeking Alpha highlighted Earthstone's recent moves and activities. There is current news about Earthstone's move to the Nasdaq, but there may be more to this name. On January 3rd, 2011, Earthstone announced a purchase of five wells in Montana that were termed under-managed. These wells were producing approximately 70 barrels of oil per day, and they were purchased for $700,000. It seems Earthstone wasn't as interested in the wells as it was in the capital equipment and land. This land covers 2,500 acres. Earthstone also commented these assets would be well placed within other areas of interest that Earthstone is pursuing. Since the purchase these wells are producing 20% more oil and it is believed oil production can improve by over 50% in the long term. Earthstone currently has other small positions in wells in the Bakken that they have reported to be going well.

Triangle Petroleum Corporation (NYSEMKT:TPLM) is a very interesting name, and along that theme of speculation has enjoyed a fairly large move this year. What is important about Triangle is how levered they are to the Bakken. I have owned this name since I purchased the stock earlier last month. Triangle had approximately 15,000 net acres in the Bakken, and were pushing to get that closer to 30,000 net acres. This company had a sizeable cash position to buy Bakken acres and this could pay off big. This company is a little bigger and less speculative than the other names, but really looks good on paper.

In summary, all of these names deserve a look with respect to speculation. I believe that Samson is not a speculative name, but a legitimate stock with upside potential. It was used in this writing as a basis for an investment in scenario that could prove profitable. Most of the names here are under $100 million in market cap and could have increased volatility, as well as a difficulty in finding tangible information with respect to valuing these stocks. As one could conceivably gain a large profit in a short time, it is also possible large losses could be garnered. These names need to be monitored closely and the use of limit orders and stops can significantly decrease the chance of large losses.

Disclosure: I am currently long SSN, TPLM and ESTE. I also own speculative names not mentioned - CFW and GPR.