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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Market convergence…..Bakken divergence.

Posted by bakkenexpert

If you would have looked at all the negative commentary on CNBC today regarding oil, financials and plunging through 12000 , you would assumed all your stocks did quite poorly today. Even oil was stagnant throughout the day with XLE only ending up 0.38%. But today is not like other days… today’s magic word of the day: divergence . One more time: di-ver-gence. Why is divergence important? Because it means that to some degree investors have disassociated broader market trends (including big oil) with bakken related plays. This bodes well for bakken for the remainder of 2008 as I suspect there will be extreme volatility in the market with housing, oil, inflation, geopolitical forces and election hoopla all exerting various levels of pressure.
Lets take a snapshot at what bakken plays did today while the dow was testing 3 month lows. CLR, EOG, WLL and XTO up 1-2% (good), NOG up 12% (great), KOG up 30% (priceless).  However,  with great gains comes great responsibility and we’ll see if our Bakken plays can sustain the momentum over the next few days and whether they can resist the urge to gap down.

Symbol Last Trade Change Volume Intraday ^DJI 4:04PM ET 12,029.06 131.24 1.08% 212,900,502 ^IXIC 5:16PM ET 2,429.71 28.02 1.14% 0 CLR 4:01PM ET 73.85 0.55 0.75% 1,169,616 EOG 4:02PM ET 133.03 1.02 0.77% 2,636,795 NOG 4:00PM ET 15.84 1.70 12.02% 1,806,783 KOG 4:00PM ET 5.05 1.21 31.51% 9,681,693 KDKN.OB 3:58PM ET 2.77 0.03 1.09% 119,827 BSIC.OB 3:58PM ET 2.56 0.10 4.07% 73,244 XTO 4:05PM ET 71.61 1.63 2.33% 9,231,836 WLL 4:03PM ET 106.15 1.86 1.78% 872,862

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