Is it over yet?

Posted by bakkenexpert

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.

bakken

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

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Tags: BTC pipeline CLR conflict georgia multiple contraction oil