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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Bakken Message Board Musings

Posted by bakken

As I do almost every day, I troll through the various message boards related to Bakken stocks. Along with the usual obfuscated swearings between longs and shorts, I have begun to notice quite a bit of banter between folks (ie individuals not affiliated with any company) who claim to have mineral rights in the Bakken region, Montana, and Texas to name a few. A recent exchange on a board involved an poster who berated another individual for overestimating lease data and NRI estimates on Bakken land and claimed he knew his facts because he had leased mineral rights to Marathon Oil in Texas.

I’d love to hear from our readers on whether this is a viable investment vehicle and whether anyone has achieved decent returns by buying land and then convincing an oil producer to exploit it. I gather from the number of postings of individuals claiming to do this, it can’t be all that lucrative or dependable. Maybe I’m in the wrong profession.

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