For Investors Only: Coastal Caribbean -- Yes, This is a Bakken Story

Summary: This small company founded in 1953, with interests in Montana's shallow natural gas, and interests in North Dakota oil (most likely Lodgepole reefs), seemingly dormant for many years, "came alive" in early 2010. With a market cap of $3 million and shares selling for five cents, the question is whether this is a company investors might want to consider. The 8,510 net acres in North Dakota might carry a book value of $42 million at $5,000/acre.

Note: I have no financial connection or agenda with anything posted on this page regarding Coastal Caribbean or Oil for America. Except for "facts" which are fairly obvious and linked to sources, this is mostly personal opinion based on information readily available on the web. The opinions are nothing more than what I might talk about at a coffee klatsch at the Economart in Williston. I do not have the training or education to do a true geologic analysis or a business analysis.

The Long Version

For those who have not heard of Coastal Caribbean, you should read the post about Oil for America first.

If you go to that site, you may want to scroll down to the first two comments to understand why I am posting on this small company.

Someone asked me what I thought about investing in Coastal Caribbean. Someone is doing their "due diligence" as they say in investing circles.

If you go to these links, you will know as much about Coastal as I know:

• Profile
• Coastal Caribbean's website
• 2010 SEC Filing: Additional Funding
• Robert Angerer and Oil for America (same link as above)

Connecting the Dots

• First: the 2010 SEC filing -- Robert Angerer is a partner in Oil for America
• Second: the Coastal Caribbean website's contact is Robert Angerer
• Third: Robert Angerer is a director of Coastal Caribbean
• Fourth: I don't find "Coastal Caribbean" or "Coastal Petroleum" listed as one of the operators at the NDIC website, but I do find "Coastal Oil and Gas."

Brief History (all opinion)

It appears to me that this is one of many small oil and gas companies operating in Montana and North Dakota. According to Yahoo!Financial the company was established in 1953. I have no idea how it came to acquire mineral acres in Montana and North Dakota, but my hunch is that a) either in 1953, with the first oil boom in North Dakota, the company was active; and, or b) subsequently, maybe very recently, the company became interested in natural gas in Montana. Remember, back in 2008 (or whenever it was) the price of natural gas did spike and natural gas looked like a great investment. Then, or later, the company bought mineral rights in North Dakota.

Comments

• According to the SEC filing in April, 2010, Robert Angerer provided additional funding to allow the company (if fully funded): to develop its Red River formation in North Dakota, to drill three Lodgepole reef wells in Slope County, and to drill six wells on its natural gas prospect in Montana (Starbuck East Shallow Gas Prospect) over the next two years.
• Coastal Caribbean appears to have been relatively dormant since 2008; the last press releases posted at its site are dated 2008, and, unless I missed it, it did not include the recent SEC filings. In fact, when you click on the website's SEC filings, it takes you to a blind site.
• Considering that 2008 was right at the beginning of the current boom, it was surprising to me to see the activity "start and stop" in that year; my hunch --- directors/partners set it up, then got more interested in other things. Or they set the pot on the back burner, and it's simmering, ready to be brought up to the front any day now.

Analysis

• The 800-pound gorilla in this room, is the outcome of the recently drilled wells into the Lodgepole reefs by Oil for America. Rumor has it that the first two wells are producing; there has been no press release to say how successful these wells are. I would assume, in the near term, the information will be tightly held, but it's hard to keep secrets in the Bakken when one can count the number of tanks on a pad and the number of trucks coming and go.
• The company has 35,873 net acres in Montana (the Starbuck East Shallow Gas Prospect), according to the 2010 SEC filing. At its 2008 website it had 32,000 acres in Montana, so the company has continued to acquire natural gas acreage.
• The company has 8,510 net acres in North Dakota, most of them in the area where the Bakken thins out, the Three Forks is in play, but ... drum roll ... where Oil for America is concentrating on the Lodgepole reefs.
• The 8,510 net acres in North Dakota are also near the Anschutz acreage that was recently sold to Occidental for about $8,000/acre.
• Forgetting about the natural gas play in Montana (and it's too far west for Bakken oil), we are left with the 8,510 acres near where OXY paid $8,000/acre.
• At $5,000/acre (and I don't think any acreage will go for less than that in this part of North Dakota), the 8,510 acres carry a book value of $42,550,000 -- or in round numbers, $40 million. 
• The company, at five cents a share has a market cap of $3 million. 
• One can look at the balance sheet, income statement, and cash flow at Yahoo!Financial but I don't think they mean a lot at this point. Whatever value the company has cannot be accurately reflected in these statements. The real value in this company is a) the value of the acreage it holds; and, b) the outcome of the wells it drills in the Lodgepole reefs. 
• My gut feeling is that folks are paying $5,000/acre in North Dakota for the Bakken and the Three Forks, so even if the Lodgepole reefs do not pan out, the company still holds some nice acreage.

Final Thoughts

• I don't invest in speculative or "penny stocks" as we used to call them back in previous oil booms. But if one has a well-diversified stock portfolio and has money he/she is willing to lose, this would be a "fun" company to consider. 
• The amount of acreage seems to be too small to interest any major player (in other words, another OXY is unlikely to buy this) but drilling is getting more and more expensive and small companies will be squeezed even more in 2011. 
• My hunch is that Coastal partners with other producers and we won't see any Coastal Caribbean permits; the company will take a working interest in wells drilled on their acreage.