Happy New Year! 4 Bakken predictions for 2011

It has been a banner year for companies operating in the Bakken region.   Brigham Exploration (BEXP: N/A N/A) ,  Northern Gas & Oil (NOG: 0.847 +3.545%)  saw gains over 100% and American Oil & Gas was acquired by Hess corporation (HES: 44.50 +1.99%).   Bigger players such as Continental Resources (CLR: 37.82 +0.42%) and Whiting Oil (WLL: 5.10 -0.78%)] also rebounded in a big way and are within striking distance of all time highs in 2011.

Symbol Trade Market Cap P/E PEG Ratio Pct from Yr Low
NOG 27.21 1.37B 132.09 3.16 Up 159.89%
HES 76.54 25.14B 10.33 0.71 Up 57.17%
CLR 58.85 10.01B 37.99 1.38 Up 62.26%
WLL 117.19 6.86B 30.64 1.68 Up 87.03%
BEXP 27.24 3.18B 92.34 1.29 Up 116.53%
EOG 91.41 23.22B 45.80 5.93 Up 7.01%
SM 58.93 3.72B 23.51 -28.62 Up 91.95%
GEOI 22.21 438.05M 21.19 N/A Up 96.72%

So what will 2011 bring for the Bakken region?   Of course,  specific predictions are rarely accurate but in the spirit of the new year we will give it our best shot.   Underlying assumptions in our predictions are that oil prices will sustain over $90 per barrel over the majority of 2011 and that the overall domestic and global economies will continue a recovery albeit slow and sometimes painful.

PREDICTION #1 –  Brigham Exploration (BEXP: N/A N/A) gets acquired by a large O&G in the region such as EOG.

It is no secret that Brigham Exploration is one of the best executing pure plays in the Bakken Region.  Their expertise in multi-stage fracking is a boon for a larger player with untapped acreage.    They may look expensive on paper to some with a forward PE around 30,  but an acquisition would be focused around operational synergy with Brigham’s drilling prowess,  not necessarily looking at their current revenue numbers.

PREDICTION #2 –  PetroBakken goes up 50% in 2011 .

Although, most US based Bakken players did well in 2010,  PetroBakken (PBN on TSX),  just across the border did not fare as well.   Declining production and sub-par execution related to a number of factors such as bad weather caused many big investors to shun this stock for most of 2010.   PetroBakken has no shortage of opportunity with 210,000 net undeveloped acres with 1,000+ locations in the Bakken region “North of the Border”.      The company will put upwards of 20 rigs into action in 2011 and has a focus on Bilateral well drilling under their “Bakken 3.0” strategy which should increase Bakken boepd significantly over the next 12 months.  More about their strategy can be found on their latest presentation posted in Dec 2010

PREDICTION #3 –  Continental Resources (CLR: 37.82 +0.42%)  tops $75 per share in 2011 .

Continental has banked a lot on their ECO-pad strategy in the latter half of 2010 and that strategy is already paying dividends.  Continental Resources has nearly doubled its production from the North Dakota Bakken during 2010, growing from an average of 8,384 (BOE) per day during the 4th quarter of 2009 to 15,000+ BOE per day in Q3 2010.   We expect production to top 21,000 BOE per day by the end of 2011.   With seemingly few factors that can stop a 30% sustained growth rate for CLR,  a move above $75 seems quite probable in 2011.

PREDICTION #4 –  Bakken drilling continues to surpass estimates and will yield record production in 2011

The growth train that is the Bakken was derailed slightly in 2008 amidst the economic crisis but came back with bang in 2010.   North Dakota is currently is pumping about 350,000 barrels of crude per day and was on pace to produce about 110 million barrels in 2010, up from about 80 million in 2009.   In 2011, we expect the following

  • Record production in excess of 140 million BOE in 2011
  • Well completion time averaging 23 days in 2011 (was over 60 days 2 years ago)
  • USGS revision that outlines more than 11 billion barrels of recoverable oil in the Bakken region
  • 1900 new wells in North Dakota (200% growth from 2010)

We’ll check back in a few months to see how our predictions have fared,  but based on the solid growth in 2010,  we are not worried about what we’ll find.    Have a great start to 2011!   Look for more insight in the coming days on new plays in the region

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