Mailbag Roundup

Below are some recent questions via email I’d thought I’d share:

Q: What happened to WSEG, It has gone down quite a bit to .19 since you blogged about it. Is it worth buying here?
A: I still believe WSEG could be a 10 bagger although the potential exists for it to gravitate to under .10 cents if no positive developments occur in the next 12 months. I am a buyer at .19 but this should be a tiny portion of any portfolio (< 5%). Continue to expect volatility in this stock. _______________________________________________________________ Q: What about some info on non E&P companies that may benefit from the Bakken? A: We are actively looking at this now and should have a blog entry or two shortly. There are a number of ancillary companies such as transportation and drillers that could benefit from the bakken _________________________________________________________________ Q: What are your favorite picks now that oil has dropped quite a bit A: SM & CLR look very attractive under $50. For something a little risker, NOG looks good under $8. ________________________________________________________________________ Q: Could you please tell me what “confidential” oil well means? I have one that is listed on your site, and would like to understand more about the classification. A: When an oil company is exploring in a new territory they have the option to list the well as confidential (also commonly known in the industry as a “tight hole”) and release limited data on the well; however, by state law, they must release full data to the state regulatory agency overseeing the operation after a period of two years.

Active Drilling Report – August 28, 2008

The latest Active Drilling Report shows that the number of Active Drilling Rigs has increased by 4 over the last report.  Continental is still far and away the leader with 18% of all Active Drilling Rigs with Marathon, Hess and  EOG running a distant second.    It is also interesting to note that Nabors is far and away the leader in terms of the rig provider with more than 30 rigs in the region.    This is still a tiny percentage of Nabors overall rigs but it is possible that in 2-3 years Nabors could be an ancillary Bakken play with over 100 rigs in the region.

Rig Operator Well Name and Number
NABORS 49 BRIGHAM OIL & GAS LP ADIX 25 1-H
NABORS 59 BURLINGTON RES O&G CO FOX TAIL 31-10H
PRECISION 645 BURLINGTON RES O&G CO AUDUBON 41-27H
NABORS 688 BURLINGTON RES O&G CO HAWKEYE 41-11H
NABORS 177 BURLINGTON RES O&G CO RINK 24-8H
NABORS 52 BURLINGTON RES O&G CO MIDNIGHT RUN 41-1H
CYCLONE 26 CONTINENTAL RESOURCES HEGGE 43-36 WSW
CYCLONE 9 CONTINENTAL RESOURCES FISCHER 11-16SH
CYCLONE 22 CONTINENTAL RESOURCES PAMELA 13-23SH
CYCLONE 27 CONTINENTAL RESOURCES LOWE 44-9SH
CYCLONE 18 CONTINENTAL RESOURCES GRAHAM 43-35SH
PATTERSON 136 CONTINENTAL RESOURCES VIOLA 1-7H
CYCLONE 2 CONTINENTAL RESOURCES SHONNA 1-15H
PATTERSON 82 CONTINENTAL RESOURCES MORRIS 1-23H
CYCLONE 19 CONTINENTAL RESOURCES SLOAN 1-17H
CYCLONE 10 CONTINENTAL RESOURCES MITTLESTADT 1-20H
CYCLONE 23 CONTINENTAL RESOURCES OMLID 1-7 H
PATTERSON 180 CONTINENTAL RESOURCES KIRKLAND 1-33H
NABORS 42 CONTINENTAL RESOURCES ANDREW 24-32NH
CYCLONE 21 CONTINENTAL RESOURCES MALCOM 1-29H
TRINIDAD 36 CONTINENTAL RESOURCES MARLENE 1-10H
NABORS 277 ENCORE OPERATING LP CHARLSON 14X-35H
CYCLONE 25 ENCORE OPERATING LP MCCOY 44-36H
NABORS 149 EOG RESOURCES INC BURKE 1-34H
PIONEER 56 EOG RESOURCES INC AUSTIN 19-30H
ENSIGN 67 EOG RESOURCES INC AUSTIN 15-17H
ENSIGN 88 EOG RESOURCES INC WAYZETTA 21-19H
NABORS 161 EOG RESOURCES INC WAYZETTA 6-12H
NABORS 337 EOG RESOURCES INC PARSHALL 8-24H
PIONEER 57 EOG RESOURCES INC PARSHALL 9-30H
NABORS 358 FIDELITY EXPL & PROD CO WEINMANN 11-28H
NABORS 455 FIDELITY EXPL & PROD CO CARTER MATTHEW 13-24H
NABORS 417 FIDELITY EXPL & PROD CO REUM 11-32H
ENSIGN 24 HEADINGTON OIL CO LLC ALKALI CREEK 44X-10
NABORS 560 HEADINGTON OIL CO LLC DEANGELIS 41X-21
NABORS 558 HELIS OIL & GAS CO. LLC STATE 4-36H
NABORS 272 HESS CORPORATION AV-WRIGLEY-163-94- 0607H-1
NABORS 165 HESS CORPORATION BB-RICE-150-95- 0718H-1
NABORS 556 HESS CORPORATION EN-CVANCARA-155-93- 1522H-1
H & P 241 HESS CORPORATION RS-R AADNES-157-91- 2726H-1
H & P 179 HESS CORPORATION RS-AADNES-157-91- 2829H-1
NABORS 742 HESS CORPORATION ST-ANDES-151-89- 2413H-1
NABORS 557 HESS CORPORATION BL-OLSON-155-96- 1003H-1
NABORS 140 HUNT OIL COMPANY ERICKSON 1-7H
BRONCO 20 HUNT OIL COMPANY KULLAND 1-30H
NABORS 684 LUFF EXPLORATION CO SANDY WHITE P-26H
H & P 258 MARATHON OIL CO OSCAR STOHLER 41-4H
H & P 255 MARATHON OIL CO T. KUPPER 14-11H
H & P 259 MARATHON OIL CO STROMMEN 14-8H
NABORS 44 MARATHON OIL CO BOB TUHY 44-19H
PATTERSON 183 MARATHON OIL CO STEFFAN 14-22H
H & P 257 MARATHON OIL CO LARRY REPP 31-16H
H & P 256 MARATHON OIL CO MARK SANDSTROM 14-32H
CYCLONE 20 MUREX PETROLEUM CORP CHANDLER JAMES 25-36H
RED HAWK 351 MUREX PETROLEUM CORP MRP 19-4
KEY 439 MUREX PETROLEUM CORP SUSAN KAYE 6-7H
NABORS 419 NEWFIELD PROD CO ROLFSRUD 1-32H
BRONCO 28 OASIS PETRO NO AMER ERIE 44-19H
H & P 172 PANTHER ENERGY CO LLC WIL E. COYOTE 9-2H
PATTERSON 490 PEAK NO DAK LLC FREDERICKS 5-11H
ENSIGN 93 PETRO HUNT LLC PHELPS MINERAL TRUST 7B-2-1H
PATTERSON 462 PRIMA EXPLORATION INC PARADOX 34-31H
RED HAWK 354 SAGEBRUSH RESOURCES LLC LODOEN 1
NABR WELL 164 SAGEBRUSH RESOURCES LLC RICE 1
NABORS 152 SAMSON RESOURCES CO RINDEL 17-162-95H
PATTERSON 167 SINCLAIR OIL & GAS CO NELSON 1-25H
RED HAWK 558 SLAWSON EXPLORATION GOLDEN EYE 1-2H
PIONEER 44 SLAWSON EXPLORATION VOYAGER #1-28H
NABORS 592 ST MARY LAND & EXPLORATION CO DOUTS 4-7H
PARAMOUNT 2 SUMMIT RESOURCES INC ROOSEVELT FEDERAL 3-4H
PARAMOUNT 1 SUMMIT RESOURCES INC GAP FEDERAL 3-8H
PATTERSON 491 SUNDANCE ENERGY INC CHASE 21-30H
NABORS 182 TRACKER RES DEVMNT OLSON 20-1H
NABORS 267 TRACKER RES DEVMNT DRESSLER #13-1H
PRECISION 511 TRACKER RES DEVMNT QUILLIAM 14-1H
NABORS 354 WHITING OIL AND GAS CORP LACEY 11-10H
GREY WOLF 520 WHITING OIL AND GAS CORP ROGGENBUCK 11-25H
NABORS 527 WHITING OIL AND GAS CORP RICHARDSON FEDERAL 11-9H
KEY 257 WHITING OIL AND GAS CORP PENNINGTON 11-3H
NABORS 686 WHITING OIL AND GAS CORP KINNOIN 11-14H
H & P 180 WINDSOR ENERGY GROUP LLC WHITMORE 1-7H
ENSIGN 46 XTO ENERGY INC SAKAKAWEA FEDERAL 13X-35R
ENSIGN 43 ZENERGY INC ZIMMERMAN #1 SWD
Total Rigs: 83

Daily Roundup – 8/25/08

It looked like it was going to be decidedly negative day for Bakken stocks today but in the afternoon, most of the losses were pared as Tropical Storm Gustav formed in the Caribbean which kept oil prices above $115.   Many of our plays including WLL and CLR have gained close to 10% in the last week or so and we are hoping that the gains have staying power with the latest uptick in oil prices.    Also,  in the last 2 weeks major analysts have issued the following positive recommendations/upgrades on Bakken plays: The general uptrend continues to be intact and as stated before,  the price of oil needs to stabilize before a longer term uptrend can be forged by our basket bakken stocks.

Company                                    Analyst                                      Rating

Kodiak Oil & Gas (KOG)                        RBC Capital Markets                               Outperform

Whiting Petroleum (WLL)                      Bank of America                                     Buy

EOG Resources                                     Oppenheimer                                         Buy

Saint Mary’s Land & Exploration          Sun Trust Rbsn Humphrey                      Buy

bakken Edit
Symbol Last Trade Change Volume Avg Vol (3m)
WLL 4:02PM ET 93.42 Down 0.29 Down 0.31% 730,230 1,128,700
MDU 4:03PM ET 32.06 Down 0.41 Down 1.26% 661,728 1,110,280
SM 4:00PM ET 42.28 Down 0.33 Down 0.77% 921,540 1,467,120
CLR 4:02PM ET 49.53 Down 0.92 Down 1.82% 2,005,769 1,886,790
EOG 4:02PM ET 102.21 Down 1.43 Down 1.38% 2,470,874 3,853,550
NOG 4:00PM ET 7.19 Down 0.25 Down 3.36% 169,975 616,788
KOG 4:00PM ET 2.98 0.00 0.00% 717,581 1,377,920
KDKN.OB 3:28PM ET 1.63 Down 0.12 Down 6.86% 20,483 164,523
BSIC.OB 3:27PM ET 1.76 Up 0.01 Up 0.57% 7,825 60,198.4
XTO 4:02PM ET 48.18 Down 0.16 Down 0.33% 9,251,943 12,135,100

Strong Bakken buying today on dollar weakness

Has it gotten to the point that we hope that hurricanes will form in the Gulf Coast to prop up our oil stocks? Sadly enough, for many, it definitely has, although they will state they aren’t looking for any human losses, just some disruption in supply. Today, tropical disturbance Fay missed oil rigs in the Gulf of Mexico, but shareholders of Bakken stocks were probably pleased that a weak dollar combined with an uptick in heating oil buoyed our plays today. Among the big gainers today were 2 of the “pure plays” in the group Continental Resources (CLR) and Whiting Petroleum (WLL) which were both up more than 5%. In addition, Venezuela’s Oil Minister Rafael Ramirez indicated that it’s may propose an oil production cut at the next OPEC meeting if crude prices decline further. The good news for Bakken investors is that oil does appear to be oversold. For example, the chart below indicates that the Energy SPDR (XLE) is currently trading below its 20,100 & 200 Day Moving Averages and trading close to its lower Bollinger Band. Volatility, however will continue to reign and expect to see swings of $4 and up within a matter of hours as competing forces battle to determine the long term trend of oil.

Symbol Last Trade Change Volume Avg Vol (3m)
WLL 4:01PM ET 89.64 Up 5.99 Up 7.16% 744,910 1,180,390
MDU 4:02PM ET 31.58 Up 0.11 Up 0.35% 564,635 1,125,130
SM 4:01PM ET 42.99 Up 1.79 Up 4.34% 919,588 1,444,730
CLR 4:04PM ET 47.65 Up 4.11 Up 9.44% 2,383,706 1,871,040
EOG 4:02PM ET 99.88 Up 5.14 Up 5.43% 4,166,094 3,844,690
NOG 4:00PM ET 7.39 Up 0.05 Up 0.68% 311,832 641,200
KOG 4:00PM ET 3.03 Up 0.13 Up 4.48% 758,228 1,459,890
KDKN.OB 3:59PM ET 1.65 Down 0.15 Down 8.28% 35,126 195,115
BSIC.OB 2:26PM ET 1.60 Down 0.05 Down 3.03% 20,993 78,292.3
XTO 4:01PM ET 46.80 Up 1.35 Up 2.97% 15,414,211 11,663,700

Is it over yet?

Are we still looking for the bottom in oil?   Trading has been very choppy over the last 10 trading days for our bakken plays. At this point, we are still waiting for this elusive bottom and only then can we form a long term base. Three months ago, the conflict between Georgia and Russia would have elevated oil prices by $5-10 a barrel due to speculation of potential disruption around the BTC-pipeline in southern Georgia. These days, however, the speculative nature has dissipated and there is no jump in oil as the overall downward pressure is still there with prices straddling $114 per bbl with the latest gasoline inventory data released today. The downtrend has seemingly beaten down bakken stocks disproportionately as much of the gains that were added in June and July are gone.   Overall though,  bakken stocks are more or less now tracking with the price of oil and we are not going to see stabilization until oil settles in a $10 trading range for a sustained period of at least 1 month.  If we look at Continental Resources (CLR), for example,  it had a huge runup after the USGS reported the positive oil reserve data in the bakken region, but the bottom fell out in late July and the sector experienced multiple contraction and eventually CLR  converged toward the price performance of XLE (an ETF of major oil companies) as shown below.    The good news is that our bakken plays really look like good values here but that is predicated on oil staying above $110 per barrel.    If we see significant price erosion to $80 per barrel,   then we could see another 25-30% haircut from current levels.

Continental Resources (CLR) vs XLE ETF

bakken Edit
Symbol Last Trade Change Volume Avg Vol (3m)
WLL 1:26PM ET 85.65 Down 2.51 Down 2.85% 402,560 1,179,810
MDU 1:26PM ET 31.50 Up 0.10 Up 0.32% 401,060 1,132,000
SM 1:25PM ET 41.48 Down 1.66 Down 3.85% 1,227,702 1,431,130
CLR 1:26PM ET 45.49 Down 2.97 Down 6.13% 1,139,717 1,836,360
EOG 1:26PM ET 96.96 Down 2.62 Down 2.63% 1,971,652 3,824,920
NOG 1:26PM ET 8.25 Up 0.15 Up 1.85% 435,275 633,691
KOG 1:26PM ET 2.90 Down 0.24 Down 7.64% 395,706 1,440,860
KDKN.OB 1:18PM ET 1.61 0.00 0.00% 15,800 222,322
BSIC.OB 1:21PM ET 1.68 Up 0.28 Up 20.00% 148,844 83,818.5
XTO 1:26PM ET 45.64 Down 0.78 Down 1.68% 7,397,819 11,343,400

August 6, 2008 – Active Drilling Rig Report

The latest active drilling rig report shows an increase of 3 rigs from the last report that we posted about 2 weeks ago. Continental still holds the lead and increased their number to 15 from 13 and hold almost a 20% hold on total active rigs and we can expect to see continued growth as outlined in their earning call earlier this month. EOG, Marathon and Hess are close behind with 10% of the rigs count. It is interesting to note that XTO only has 1 active rig even though they made a huge 1.85 billion dollar Bakken acreage purchase earlier in the year. I would not be surprised if they ramp up their drilling program in the region in the next few months.

Operator Well Name and Number Start Date
BRIGHAM OIL & GAS LP ADIX 25 1-H 8/4/2008
BURLINGTON RES O&G CO FOX TAIL 31-10H 7/31/2008
BURLINGTON RES O&G CO COLTER 44-14H * MIRU
BURLINGTON RES O&G CO RINK 24-8H 7/27/2008
BURLINGTON RES O&G CO MIDNIGHT RUN 41-1H 7/23/2008
CONTINENTAL RESOURCES HEGGE 43-36 WSW 7/16/2008
CONTINENTAL RESOURCES ELSIE 1-22FRH 7/23/2008
CONTINENTAL RESOURCES LOWE 44-9NH 7/25/2008
CONTINENTAL RESOURCES FISCHER 11-16SH 8/1/2008
CONTINENTAL RESOURCES GRAHAM 43-35SH 6/27/2008
CONTINENTAL RESOURCES OSCAR 1-25H 6/20/2008
CONTINENTAL RESOURCES ARVID 1-34H 7/1/2008
CONTINENTAL RESOURCES SKACHENKO 1-31H 6/28/2008
CONTINENTAL RESOURCES MORRIS 1-23H 7/29/2008
CONTINENTAL RESOURCES SLOAN 1-17H 8/5/2008
CONTINENTAL RESOURCES OMLID 1-7 H 8/1/2008
CONTINENTAL RESOURCES KIRKLAND 1-33H 7/22/2008
CONTINENTAL RESOURCES ANDREW 24-32NH * MIRU
CONTINENTAL RESOURCES MALCOM 1-29H 8/2/2008
CONTINENTAL RESOURCES OMAR 1-1H 6/1/2008
EAGLE OPERATING INC E-M FLYING H 5-9 7/30/2008
ENCORE OPERATING LP SKOGLUND 11-10H 6/24/2008
ENCORE OPERATING LP CHARLSON 44-32H 7/5/2008
EOG RESOURCES INC AUSTIN 13-08H 7/11/2008
EOG RESOURCES INC AUSTIN 22-31H 7/2/2008
EOG RESOURCES INC PARSHALL 13-26H 7/12/2008
EOG RESOURCES INC WAYZETTA 21-19H * MIRU
EOG RESOURCES INC PARSHALL 6-22H 7/29/2008
EOG RESOURCES INC WAYZETTA 6-12H 7/30/2008
EOG RESOURCES INC WAYZETTA 13-01H 8/4/2008
EOG RESOURCES INC AUSTIN 25-35H 7/15/2008
FIDELITY EXPL & PROD CO WEINMANN 11-28H 8/2/2008
FIDELITY EXPL & PROD CO LEDENE 44-5H 7/23/2008
FIDELITY EXPL & PROD CO FLADELAND 11-22H 7/30/2008
GOLDEN EYE RESOURCES, LLC STEINBERGER #1-16 7/22/2008
HEADINGTON OIL CO LLC ALKALI CREEK 44X-10 7/21/2008
HEADINGTON OIL CO LLC HARTSOCH STATE 34X-36 7/12/2008
HELIS OIL & GAS CO. LLC LEVANG 4-13H 7/11/2008
HESS CORPORATION BB-RICE-150-95- 0718H-1 * MIRU
HESS CORPORATION EN-NESET-156-94- 0706H-1 6/28/2008
HESS CORPORATION EN-PERSON-156-94- 1102H-1 7/3/2008
HESS CORPORATION ST-ANDES-151-89- 2413H-1 7/22/2008
HESS CORPORATION RS-AADNES-157-91- 2829H-1 8/1/2008
HESS CORPORATION RS-J NELSON-156-91- 0708H-1 7/14/2008
HESS CORPORATION BL-OLSON-155-96- 1003H-1 7/20/2008
HUNT OIL COMPANY CHARLIE 1-06H 7/10/2008
LUFF EXPLORATION CO GR-RRBU Z-12H 7/13/2008
MARATHON OIL CO PELTON 24-31H 7/8/2008
MARATHON OIL CO KRENZEL 34-26H 7/16/2008
MARATHON OIL CO WARDNER 14-35H 7/15/2008
MARATHON OIL CO L.R. 21-16H 7/15/2008
MARATHON OIL CO FRED HANSEN 34-8H 7/30/2008
MARATHON OIL CO OSCAR STOHLER 41-4H 8/2/2008
MARATHON OIL CO BOTTLESON 34-22H 7/24/2008
MUREX PETROLEUM CORP CHANDLER JAMES 25-36H 7/4/2008
MUREX PETROLEUM CORP SHELDON MARK 27-34H 7/10/2008
NEWFIELD PROD CO ROLFSRUD 1-32H 8/1/2008
OASIS PETRO NO AMER ERIE 44-19H 7/28/2008
PEAK NO DAK LLC FREDERICKS 5-11H 7/28/2008
PETRO HUNT LLC USA 35D-1-1H 5/6/2008
PRIMA EXPLORATION INC MESA 24-2H 7/18/2008
SAGEBRUSH RESOURCES LLC RICE ET AL 1H 8/1/2008
SAMSON RESOURCES CO SPARKS 8-162-98H 7/9/2008
SINCLAIR OIL & GAS CO NELSON 1-25H 7/20/2008
SLAWSON EXPLORATION PAYARA 1-21H 6/25/2008
ST MARY LAND & EXPLORATION CO CLARK 16-27H 7/6/2008
ST MARY LAND & EXPLORATION CO BEAR DEN FEDERAL 10-25HR 7/19/2008
SUMMIT RESOURCES INC GAP FEDERAL 3-8H 7/29/2008
TRACKER RES DEVMNT OLSON 20-1H 7/28/2008
TRACKER RES DEVMNT DRESSLER #13-1H * MIRU
WARD-WILLISTON CO SUNDAHL 20-34 7/30/2008
WHITING OIL AND GAS CORP LITTLEFIELD 11-7H 6/30/2008
WHITING OIL AND GAS CORP BREHM 44-5H 7/18/2008
WHITING OIL AND GAS CORP NESHEIM 1-24H 7/16/2008
WHITING OIL AND GAS CORP LACEY 11-10H 7/25/2008
WHITING OIL AND GAS CORP ROGGENBUCK 11-25H 8/3/2008
WINDSOR ENERGY GROUP LLC WHITMORE 1-7H 7/24/2008
XTO ENERGY INC SAKAKAWEA FEDERAL 13X-35R 7/27/2008
ZENERGY INC JEAN BAPTISTE 1-11H 7/20/2008