Dec
27
Posted by bakken
After a stellar set of predictions in 2011, our 2012 predictions were a bit off the mark. However we are confident that we will have a roaring comeback in 2013 and a number of predictions will come to fruition. In 2012 , we saw the vast majority of Bakken producers end the year 15-20% off their highs (most peaked in Feb/March of 2012) but very close to where they started the year in 2012. Effectively most Bakken plays traded sideways throughout the year as oil wallowed between $80-$90 for the better part of the year.
| SYMBOL |
PRICE |
52 WEEK RANGE |
% CHG FROM 52-WK HIGH |
1-YR TRGT PRICE |
P/E NEXT YR |
|
| CLR |
73.022 |
61.02 |
97.19 |
-24.92% |
96.25 |
15.80 |
|
| WLL |
43.17 |
35.68 |
63.97 |
-32.45% |
58.81 |
11.67 |
|
| EOG |
121.50 |
82.48 |
124.5 |
-2.47% |
134.83 |
19.43 |
|
| STO |
24.80 |
22 |
28.95 |
-14.34% |
27.22 |
8.53 |
|
| HES |
52.59 |
39.67 |
67.86 |
-22.43% |
64.67 |
8.41 |
|
| KOG |
8.82 |
6.92 |
10.9 |
-18.90% |
11.39 |
12.39 |
|
| MRO |
30.51 |
23.17 |
35.49 |
-13.96% |
37.24 |
9.47 |
|
In 2013 however, we do expect a rebound of top tier Bakken stocks but this is largely predicated on the fact that the US economy will have a modest recovery (assuming congress can get past the fiscal cliff issues). Without further ado, our top 3 predictions are below.
- Oasis Petroleum (OAS: 37.92 -0.76%) hits $45 per share in 2013 or gets acquired. - This admittedly is a regurgitation of our 2012 prediction, but we feel strongly that Oasis has quality acreage and production ramp-up that will make it an attractive target. With the exception of maybe 1-2 other O&G companies in the region, Oasis is one of the closest things to a Bakken “pure play” stock. For more detailed analysis on OAS, see our latest in-depth article on the company.
- US Silica (SLCA: 22.35 +1.13%) hits $25 per share in 2013 – We have outlined this stock a few times and it certainly is a market leader in Silica production in the Bakken Region . The forward PE for this stock continues to be under 8 and has extremely strong cash flow which position it well for growth in 2013.
- The Bakken Region will surpass 28 million barrels of production per month with 6000 producing wells. – The Bakken region is continuing to maintain its growth trajectory with 30%+ year over year growth expected through 2020. Some interesting stats on monthly production can be found at the North Dakota Dept of Mineral Resources site here.
Until next time, keep drilling
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Jul
26
Posted by bakken
Over the past few years we have profiled a number of development, exploration, drillers as well as oil & gas companies in the Bakken region. Some of these have been prolific gainers for investors such as Brigham Exploration (bought by Statoil), Northern Oil & Gas (NOG: 13.49 -0.59%) and Kodiak Oil & Gas (KOG: 8.87 -0.78%). In looking at the next round of potential superstars in the region, we see that the most promising stock, US Silica (SLCA: 22.35 +1.13%) actually has never harvested a drop of oil in it’s history. It is neither a driller or producer, in fact, they make sand, specifically, fracking sand to be exact. As boring as that sounds, sand, or silica is a critical in the fracking process. Fracking sand refers to sand and similar materials that serve as “proppants” — which are blasted under pressure into a shale gas well along with large quantities of water and industrial fluids to stimulate gas production. Proppants are used to “prop” open the underground cracks from which natural gas is harvested during hydraulic fracturing.
The company is also a leading producer of industrial minerals, whole grain silica, ground silica, fine ground silica, calcined kaolin clay and aplite clay. They have 200 products in these categories and the variety of industries and applications served by U.S. Silica includes oil and gas, glass, chemicals, foundry, building products, fillers and extenders, recreation, industrial filtration and treatment, and testing and analysis. In other words, their products are also used in a number of industries outside of Oil & Gas
US Silica had an IPO back in February of this year and has been largely under the radar of major investment houses. In looking at a current chart below, the stock is bottoming around $10 and is forming a triple bottom in that range. In addition, the stock is currently at the lower end of its Bollinger band indicating there could be a bounce towards $12 in the next few weeks. There are only 3 investment houses that follow the stock, Merrill Lynch, Morgan Stanley and Dahlman Rose & Co and they have an average price target of $25 on the stock which expects a reasonable forward PE slightly below 10. The current forward PE is below 5, yes, you read that right, below 5 and the company expects to earn 2.06 per share in 2013. Based on its 30% yoy growth and recent catalysts like the deal with Berkshire Hathaway’s BNSF Railways could easily push 2014 earnings to $2.8 – $2.9 per share which corresponds to a PE closer to 3 (note that industry peers have a PE closer to 12-15). The company recently opened an office in Russia (which recently had a large shale find) and has a focus on capitalizing on fracking sand needs all over the globe. Expect to see more offices open near large shale finds. The stock has been currently plagued by thin trading with 100,000 shares causing 5% swings in the stock, but as institutional investors start to track this stock, we expect the volume to start aligning with other Bakken plays and providing stability to the stock. At current levels, the stock is extremely attractive and we wouldn’t be surprised to see the stock be an easy double by the end of 2012 to $20. In addition, if the stock can maintain 25-30% growth rates, and its PE multiple shows some improvement, the company could easily grow to a $2.5 billion company with $850 million in Revenue by 2015 and a stock price around $45-50. We’ll continue to track this stock over the coming months to see if investors have finally caught on.
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