Investment Commentary

The Million Dollar Way (All Bakken All The Time) started out as an educational site, where I hoped to minimize political comment and investment links. However, over time, it is obvious that it is very difficult to separate investment links from the Bakken.

It is also obvious that some readers that come to my site are interested in investment commentary. For that reason, I will post commentary devoted to investment in general, and in the Bakken specifically, on an irregular basis.

Current as of August 7, 2010

North Dakota Sweet Oil 

• December, 2010: hits $70, but finishes at $68.  A good month.
  
• November, 2010: mid to low 60's. Slowly but surely.
  
• October, 2010: finally back to 60. Heading in the right direction. 
  
• September, 2010: stays in the mid-50s through the month.
• August, 2010: opens at $58 on the first day of August, and nears $62 two days later. August: Harbinger of better days ahead, or just a head fake?
• July, 2010: a few days in the $52 to $54 range, but then gradual increase to $57 range. July: not a great month, but at least it's going in the right direction.
• June, 2010: enters the month at $52 and gradually creeps up to $58, but ends the month at $54. June: another horrible month, but trending better (if one can call this a trend).
•  May, 2010: opened the month at $64 but quickly dropped to low $50 range, and hit a low of $47, before recovering and finishing the month at $53. May: a horrible month.
• April, 2010: $64 the first 20 days; then jumped to $78 on April 21 but returned to $62 - $64 for rest of month.  April: an "OK" month.

***** 

COFFEE TALK

E&P, Group 1: EOG, Hess, CLR

EOG was shellacked in the 3rd quarter. They have two problems. First, EOG has too much natural gas; and, second, it's practice of not fracking their Bakken wells during the winter has to be very, very expensive. It certainly delays cash flow. I did say that I would buy EOG if it dropped below $90; it dropped to $88 and I bought a few shares. CLR is my favorite in this group: the CEO is aggressive; the company has the most rigs in North Dakota (and may add more); is most innovative (in my mind, was singularly responsible for the multiple-well pad).

E&P, Group 2: BEXP, WLL

My thoughts have not changed regarding these companies following third calendar quarter, 2010, results.  Many folks seem to have a love-hate relationship with BEXP, due to its aggressive marketing.  The company strives to maximize initial production (IP) numbers and consistently pushes the envelope on the number of frac stages it employs. However, BEXP seems to have regained its footing with regard to financing. It also has two dedicated frack crews.

WLL is the sleeper. A couple years ago it placed much of its assets into the Whiting Trust and that may have scared investors away; it scared me away. It was another miss on my part. WLL continues to do very, very well.

E&P, Group 3: KOG

KOG was behind the power curve earlier this year due to bureaucratic delays in the reservation. Since that red tape has been removed, things are moving along nicely. For awhile there it seemed KOG was going to break out but then it dropped back to $6.00 resulting in a great buying opportunity. I finally broke down and bought a few shares of KOG when it dropped back to $6. Remember, KOG has partnered on at least two wells with XTO ( XOM). KOG has, or will have a third rig which suggests they are doing well.

E&P, Group 4: NOG

NOG is one of my favorite small companies in the Bakken. It has partnered with Slawson which has consistently reported some very good wells. I am accumulating NOG. 

Conglomerate: MDU

MDU was one of the first companies I ever invested in, almost 30 years ago. I held it and accumulated shares in MDU all those years, and reluctantly sold it at the depth of the recession back in 2008. I continue to watch MDU but I've lost a lot of interest in it; the recovery/turn around is just too slow for someone who has waited a long time for a turnaround. I think this is a great company for a conservative investor with a long horizon. They have but one rig in the Bakken and are only just considering adding a second rig.

Pipelines: ENB, EEP

I can't remember when I first started investing in ENB; it's probably only been a few years but it seems like forever. That's probably because I've been driving past the huge ENB terminal west of Williston, North Dakota, for ten years or longer. I couldn't be happier holding shares in this company. ENB and EEP recovered nicely from the Michigan spill. I continue to accumulate. 

Dividend  and Distribution Plays: EEP, WIN, CTL, NLY, ERF, WHX

With the uncertainty and general bearishness in the market during the past twelve months, I did something I had not done before.  I started investing in companies that paid better-than-average dividends or in master limited partnerships that offered enticing distributions.

I traded in and out of WIN and CTL and no longer hold either. I currently hold ERF.

I am currently holding WHX for its distribution.

All things being equal, master limited partnerships might be a better way to go than trusts. American trusts have a defined "ending." At some point, they "end."