A New Look at Bakken Oil
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As the world watches the dreadful scenes coming from the BP oil spill, the blame game ratchets up and now it's reported that over 100 lawsuits have been filed in relation to the spill. Tough times for BP, Transocean, and Halliburton.

Given all the attention to the Gulf Coast scant attention is being paid to one of the fastest growing oil regions in the nation. I'm sure you've heard of it. It's called the Bakken. It's a region in the upper Midwest of the U.S. and lower Canadian Plains. Unlike much of the continental oil development fields that rely on extracting oil from sand and shale deposits, the Bakken produces light sweet crude: the preference of most oil refiners.

The Bakken pool is part of a larger oil-bearing shale formation called the Williston Basin. The Williston Basin covers parts of Wyoming, the Dakotas, Montana, and Canada.

Some believe the Williston Basin holds hundreds of billions of barrels of recoverable oil. But right now, the most firm estimates are for the Bakken pool. Recoverable oil in the Bakken is estimated to be 5 billion barrels.

That's a substantial amount of oil. And even better, it's fairly easy and somewhat inexpensive to recover with horizontal drilling technology.

I recently recommended several companies in this region to readers of Energy World Profits, my energy investment newsletter service. One of my favorites, though all of them are great investments, is Northern Oil and Gas (AMEX:NOG).

Northern Oil and Gas may be the best Bakken oil producer you have never heard of. I don’t why the company has stayed below the radar of the investment community. But I do know it won’t continue to do so. Not when revenues and earnings are growing as fast as they are.

Northern Oil & Gas explores for and develops oil and natural gas properties in the Rocky Mountain region of the U.S. The company is emerging from development stage and has recently started to bring production online. And that means it’s a great time to buy the stock.

It controls approximately 70,000 acres in the Williston Basin Bakken and Three Forks Play, where rapid development is bringing online production closer by the day.

Currently 60 rigs are actively drilling in North Dakota, up 100% from 30 rigs in February of 2009.  For next year, Northern Oil has already set aside over $50 million to drill between 14 and 16 wells in this region. Continued increases in drilling activity will speed up the development of their core acreage position.

The company is showing no signs of slowing down drilling - and is actively seeking money to fund growth.  In November 2009, the company completed a secondary stock offering of 6.5 million shares and the $60 million in proceeds is decreasing the

company’s debt-load and financing expansion. Another secondary at $16 a share in April 2010 netted $82 million for the company.

It should be noted that the investment community is happy to buy the stock of companies with Bakken oil production.

For 2011, we expect the company to make a second consecutive triple digit percentage gain to $1.10 per share. Revenue will also significantly increase - by over 250% - to $135 million in 2010.

The company is new to profitability, which can mean that earnings will be erratic in the future. We will use a 25 times forward multiple and adjust this number if necessary. The result gives us a target price of $27.50.

We are optimistic about the development in the Bakken and Three Forks regions. In addition, the company has proven that they can keep costs to a minimum when drilling new sites. This ability will allow the company to puff up earnings as they complete wells at higher oil prices.

I've recommended to Energy World Profits readers to buy Northern Oil & Gas at or below $18 a share.

Northern Oil and Gas is one of three oil recommendations in my just released special report, Bakken Profits: 3 Top Oil & Gas Stocks from the Fastest Growing Oil Region in the U.S.

If you're interested in how to profit from the Bakken and getting comprehensive research on steady, solid energy investment opportunities I suggest you take a couple minutes to find out more about Energy World Profits.

Click here.





Posted 05-13-2010 1:42 PM by Ian Wyatt