Mike Filloon's Update On Microcaps In The Bakken With A Focus On American Eagle Petroleum

The article is at Seeking Alpha:

The oil and gas renaissance occurring in the United States has provided a unique investment opportunity. It is less difficult to choose large-cap oil and gas names but may provide less growth and return on investment. Smaller operators can provide better returns, but it is likely and investor would shoulder more risk. Everyone is looking for the lottery ticket type investment, when in reality the chances of finding it are quite low. It is also important to note that these fast growing stocks are generally a short-term investment and not a stock one could hold on to over a matter of years. I don't generally recommend smaller operators as it is possible one could lose the majority of an investment.

Mike then goes on to look at the following companies as they compare to American Eagle:

• Emerald Oil: great acreage; excellent results
• American Eagle: growth is attributed to its operated Spyglass Prospect wells
• Magnum Hunter: focuses on the Three Folks; believes it has a sweet spot
• SM Energy: active in Colgan oil field (Divide); targeting the TFS
• KOG's Liberty wells in western Williams are noteworthy
• EOG: Mike lists EOG's top wells in west Williams County

Summary:

In summary, AMZG is an interesting investment. It has low well costs when compared to other, better producing areas of the Williston Basin. Although these wells produce less, payback times are still competitive. Its most recent quarter was quite good and adds optimism to the names going forward. Magnum Hunter and SM Energy have been working the area with success, and it would seem AMZG could improve well results and lower costs based on Magnum Hunter's current data. When valuing this acreage, keep in mind the upper Three Forks is the main target, and middle Bakken results have not been as good. This could still be a stacked play, as the second and third benches may be productive as well. 

By the way, look at the question asked by the first person to comment at the linked article by Mike. Regular readers know the answer to that question.