Strong Follow Through

Posted by bakken

Our recent cycle of successive groundhog days have temporarily ceased with solid upticks over the last 3 trading days.   Oil saw a temporary bottom around $59 a few days ago and has bounced strongly off that mark into the mid sixties.     It has also helped that Exxon-Mobil reported some jaw dropping profits of $14 billion as well as some good news from our bakken plays as listed below:

• Brigham Exploration Company (NasdaqGS:BEXP – News) announced three high flow working interest Bakken discoveries, participation in its first Anadarko Basin horizontal Woodford shale well
• Continental Resources (CLR) stated its third-quarter net income soared to a record of $112.4 million, or $2.65 per share, on revenue of $388.4 million which is up 135% from same quarter last year.   The news sent the stock up over 10% today
• Basic Earth Science Systems, Inc. (Basic Earth) (OTC Bulletin Board: BSIC – News) announced that its Board of Directors has authorized the repurchase of up to 500,000 shares of the Company’s outstanding common stock over the next 18 months.  This is quite unusual for a company of this size and signals that the mgmt of the company feels strongly that the stock is undervalued.

bakken

Symbol	Last Trade		Change		Volume	Avg Vol (3m)
NOG	1:03PM ET	4.74	0.18	4.06%	132,642	367,429
WLL	1:05PM ET	47.85	6.85	16.71%	1,965,892	1,342,220
SM	1:05PM ET	23.21	0.92	4.13%	423,417	1,271,550
MDU	1:05PM ET	18.55	0.85	4.80%	764,356	1,442,780
GEOI	1:04PM ET	12.82	0.41	3.30%	41,570	130,341
BSIC.OB	12:02PM ET	0.90	0.08	9.76%	2,500	38,635.9
WSEG.OB	9:52AM ET	0.12	0.01	9.09%	3,700	573,402
CLR	1:05PM ET	28.40	2.76	10.76%	1,256,084	2,248,770
BEXP	1:05PM ET	6.99	0.55	8.54%	433,091	1,027,970
KDKN.OB	12:30PM ET	0.60	0.08	15.38%	640,041	95,348.4
KOG	1:02PM ET	0.71	0.00	0.11%	181,168	1,038,580
EOG	1:05PM ET	75.01	2.43	3.35%	2,558,985	4,877,390

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Continental Resources (CLR) plugged by Analyst Note

Posted by bakken

Today, Deutsche Bank analyst Shannon Nome came out with a negative note on Continental Resources (CLR) stating in a note to clients that shares have seen a 167 percent jump year-to-date, which outpaces the average section gain of 37 percent during the same period. She also reiterated her target of $53 which is more than 20% below the current share price. Furthermore, she outlined the “downspacing potential” within the important Woodford Shale and North Dakota Bakken plays and stated that the stock discounts much of this potential.

So lets take a step back and analyze this risk by looking at downspacing. Downspacing is a spacing unit defined as the area which one well can effectively drain. If you put too many well close together, you could effectively drain a portion of your well and reduce the pressure of adjacent wells.

Now in looking at recent CLR reports, It appears they are using 640 acre spacing for ND Bakken
and 80 acre for Woodford Shale which look to be sufficient for that region and has not caused any saturation as yet. I don’t see any evidence that this spacing is a major concern given necessary adjustments can be made if they run into a problematic section. As conspiracy theorists and message boarders like to postulate, it looks like the Analyst is just trying to bring down the stock price so DB clients can load up. Or a more reasonable theory is that she simply thinks that the stock has gotten ahead of itself and needs to be put in the corner for a while with the Dunce cap on.

The important take away for any type of short or mid term CLR investor is that ANY analyst can bring this type of disaster to your holdings at any time. Expect a negative note or downgrade if one of your stocks has made a good run in a short period (0-3 months). Taking a good portion off the table may mitigate this risk and prevent you from throwing up a little in your mouth when you see a downgrade at 7:30 AM and there is nothing you can do about it.

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