Glass half full?

Posted by bakkenexpert

The pain continues today for many oil stocks as there is still fear that oil prices will continue to drop from its current level of $125 per barrel. If we can sustain 1 or 2 weeks of stable oil prices, then I believe the controlled “panic selling” will subside and Bakken stocks can start trading independently of other oil sector stocks. At this point, standard option strategies like selling out of the money (OOTM) puts are not advisable as we don’t know where the bottom is of this oil vacuum. We are hunkering down for the next leg here and hoping for stabilization in the next week when some of the Bakken plays report earnings. There were a few bright spots today with WLL, BSIC.OB and XTO in the green. Good Luck to all.

bakken

Symbol	Last Trade		Change		Volume	Avg Vol (3m)
WLL	4:03PM ET	84.95	1.31	1.57%	1,194,647	1,115,910
MDU	4:03PM ET	31.14	1.21	3.74%	1,288,924	1,086,270
SM	4:01PM ET	43.23	0.39	0.89%	2,176,189	1,369,390
CLR	4:04PM ET	62.08	0.19	0.31%	2,377,113	1,737,110
EOG	4:00PM ET	101.18	1.84	1.79%	5,746,200	3,521,540
NOG	4:00PM ET	10.10	0.51	4.81%	410,358	594,478
KOG	4:00PM ET	3.00	0.27	8.26%	1,848,770	1,461,550
KDKN.OB	3:59PM ET	2.03	0.03	1.46%	108,734	243,183
BSIC.OB	3:50PM ET	1.82	0.17	10.30%	8,501	94,520.3
XTO	4:02PM ET	48.78	0.54	1.12%	55,620,781	9,122,790

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Back to Basics – Picking up BSIC.OB here

Posted by bakkenexpert

Ok, so I’ve been watching this one but haven’t decided to pull the trigger until now. Today Basic Earth Science Systems (BSIC.OB) issued an updated on their Bakken Well. The Paulson 14-9H well had its best day near the end of May when it produced 687 barrels of oil. During May, the well produced approximately 5,400 barrels of oil over 14 days for an average of 387 barrels of oil per day. Currently BSIC is working on stabilizing the flow and at that point the production rates can be better estimated. Basic only has a 1.2469% working interest (0.9975% net revenue interest) in the well which is operated by Marathon Oil Company (MRO) so the revenue impact is not expected to be substantial in my mind.    The  Paulson 14-9H well was a nice friday tidbit but nothing to put on the refrigerator.   The next paragraph is what got my attention:

“In related events, the success of offset wells near our Banks Prospect, a 13,000 acre horizontal Bakken project, has dramatically enhanced the viability of our acreage. As a result, the Company and its partners have been approached by several companies wishing to acquire a portion of Basic’s acreage. While some offers are enticing, at this point, no agreements have been made. If we were to enter into an agreement, in addition to being fairly compensated for our investment and maintaining as much of our interest as possible, our objective would be to increase the effectiveness of the original joint venture agreement so that development could not be stalled by a handful of non-consenting owners.”

I think this is a VERY positive development for BSIC. Typically for a company as small as BSIC, it is difficult to scale operations and fund exploration and production. It appears they are open to divesting some of their prime Bakken acreage for NRI in return as well as compensation for the land. For a company with a tiny 40 million dollar market cap, this could be huge in terms of revenue and profit. A single lucrative deal could propel the company to a low single digit PE.

Disclosure: We own shares of BSIC.OB as of June 27, 2008. View our Disclaimer here

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