127

Even for those who are getting used to "the Bakken," it must be hard for them to contain their enthusiasm when they see the number of active rigs set a new record.

Today, another active rig record has been set: 127 active rigs in North Dakota.

I think the number of active rigs will level off at 130 +/- 5.

Interestingly, one of the most visible Bakken players has not participated in this run-up. During the past nine months or so when the number of active rigs has increased significantly, BEXP has remained steady at five (5) rigs. Continental Resources (CLR), by the way, has increased its number of rigs from five (5) to eighteen (18). I count seventeen active CLR rigs today. I may have miscounted "the 18" -- time will tell.

The point is that BEXP has been reporting some monster wells based on 24-hour flowback numbers but it surprises me that the company hasn't followed through with increasing the number of rigs in North Dakota.  This will keep their CAPEX costs down, and should result in some great near-term quarterly reports.

There are two basic business models in the Bakken: own/lease your own rigs, or take a working interest and partner with an operator. Some do both.

Of the former, WLL, CLR, and KOG are most exciting for me. I own shares in one of these. I can make cases for all three: WLL seems best poised for spectacular results based on its concentration in the prolific Sanish. CLR, as noted above, is putting its money where its mouth is by tripling the number of active rigs -- the most of any Bakken operator. KOG is a little company with greater upside. It is concentrated in the reservation and activity there was delayed due to bureaucratic inefficiency at the Federal level. That has been resolved and KOG should do very well this year and next. American Energy (AEZ; 2 active rigs today) cannot be forgotten either; it is in a period of transition, selling all assets in Wyoming and becoming a Bakken pure play company.

Of those whose business model is as a partner (general term, not legal term), NOG and USEG come to mind.

But don't forget: there are other ways to play the Bakken. MDU is a diversified utility in the Bakken; ENB is an important pipeline play in the Bakken; and then there is the Medora Musical (a great play with lots of energy, but not hydrocarbon).