Tuesday, January 24, 2012

For Investors Only -- NOG, CLR -- Huge Profit Margins -- The Bakken, North Dakota, USA

This is very, very interesting.

Let's say you took a data base of ALL publicly listed companies in the US. And then ranked them according to profit margins, highest to lowest. All publicly listed companies. And then wrote a story in a national investors newspaper/journal featuring five or six. And that newspaper/journal does not target any specific industry. What would you expect to find? Certainly not this:
High oil prices hurt at the gas pump. But they help at the wellhead pump. That has boosted profit margins at Continental Resources the largest landholder in the Bakken Shale oil and gas play in parts of North Dakota, Montana and Canada.

Continental generated almost 63 cents of profit for every dollar of sales last year, topping IBD's Screen of the Day for Monday, which ranks firms by that key metric.

Northern Oil & Gas, another Bakken Shale play, also ranked high, with 58.1%.

Credit card processor Visa ranked second, at a 60.2% annual margin, with MasterCard is a few rungs lower, with a profit margin just under 50%.
Of ALL the publicly traded companies in the US, NOG comes in at number 3. I remember a lot of hoopla about this company some months ago.  Number 3.

And CLR #1.

Incredible.

5 comments:

  1. Hmm. Not sure why you are so surprised that nog is low overhead/high margin.
    Nog activity is land acquisition, non operator and the associated accounting and business reporting. As non operator, all they do is write checks to the operator.
    And when commodity prices are high, commodity producers who have product see high margins (farmers for example). Nog has no eng and no geo. The sum total of nog "expertise" is to find out where majors are leasing (eog in mountrail) and out bid on a few acres per section. Majors are slow in leasing process (it drags on for months) and majors will give up a few acres per section to avoid a bidding war on the remaining unleased land.
    Nog is a one trick pony.

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  2. Replies
    1. Apple, Inc. is a one-trick pony also: innovation, and its margins are one of the best, but pale alongside NOG's.

      I'm not an apologist for NOG, but it is what it is.

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  3. This from memory but I recall Continental is like an IPO where the founders hold a strong majority of the stock. Thus the shares available in the market receive a minority of the profits. Also, CLR and Harord Hamm have been very transparent about what and how the company is doing so this value could be built into the market. Thus CLR can be doing very well but you cannot automatically assume a stock price increase if you buy CLR today.

    If I were a pension plan I would invest in CLR because of their "20 year plan" scenario laid out. This is already embedded in the price of the market shares

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    Replies
    1. Greg, thank you.

      Again, this is not an investment site. What "surprised" me was that of all the publicly traded companies out there -- there are thousands -- CLR and NOG rose to the top.

      There are scores of publicly traded oil exploration companies, some of them in the Bakken, some of them not, and yet it was CLR at the top and NOG near the top.

      "Anonymous" who simply attributed this to commodity prices fails to provide the margins for COP, XOM, BP, Statoil, CVX, MRO to support his/her case.

      I just found it interesting. I certainly was not suggesting anything about investing.

      In fact, I can easily argue that this may not be the best time to invest in oil exploration companies in the Bakken, unless one is a long-term investor and/or a "believer" in "dollar-averaging" method of investing.

      McDonald's might be a much better investment right now.

      But again, this is not an investment site. I speak colloquially (sp?) and in the manner I would hold court in Economart.

      Delete