Coastal Caribbean Was Up 40% Today -- Took Off in Last Hour of Trading -- This Is A Bakken Play

This is posted tongue-in-cheek following my long post yesterday regarding Coastal Caribbean. I have added it to the ticker symbols at the sidebar on the right, down at the bottom.

Dunn County: 250 - 400 New Wells/Year for Next 3 - 5 Years -- Bakken, North Dakota, USA

I've had this story on the "back burner" for weeks; finally found some time to post it.

Nothing really new, but some folks might be interested. When you get to the site, look at the 11th paragraph:

He said he had attended a recent meeting and been told that northern Dunn County could expect 250 to 400 new wells each year for the next three to five years.

And that's just "northern" Dunn County. I can only imagine if "they" crack the code on hitting the Lodgepole in southwestern Dunn County.

I opined earlier today or yesterday that infrastructure (takeaway capacity) was one of three major bottle necks in the Bakken.

Some (S)well Names -- Changes and Other Observations -- North Dakota, USA

EOG renames three wells:

• 19360, Liberty LR 15-26W (was Liberty LR-1526H). Note the "W" designation where one normally sees and "H." I opined that the "LR" meant a long lateral under the river; perhaps the "W" is "water." I have no idea.
• 19528, Van Hook 16-35H (was Van Hook 111-35H). I remember some folks opining that the "111" designation was for the TFH. Again, I don't know.
• 99187, Mont 11-28 SWD (was Mont 11-28M). SWD is salt water disposal. With a "99XXX" file number this well was never planned to produce oil.

Also, I noted that file #20195, Oil for America, is called the Dohrmann 14-1. Note that there is no "H" designation. This is a vertical well that will target a Lodgepole reef.

Three Peak Grasslands Wells Now Operated by KOG -- North Dakota, USA

In today's daily activity report, this little gem:

Change of operator from Peak Grasslands, LLC, to KOG:

• 18349, Sondrol 20-21H, 30-149N-98W
• 18690, Schilke 8-24H, 8-149N-98W
• 18786, Wisness 21-34H, 21-149N-98W

all in McKenzie County.

This is the story. KOG bought 14,494 net acres from Peak Grasslands back in October, 2010. It seems like I vaguely remember this deal and may have even posted something about it at the time, but now I forget. The SEC filing is here (a good example of why I am glad I am not a contract lawyer.)

Regardless, KOG picked up 14,494 net acres for $99 million in cash plus 2.75 million shares of KOG (at $4.00/share) -- yes, I remember posting that, because I was confused by the 2.75 million shares. Too much for me to remember.

Regardless, the link above is an excellent link for investors interested in KOG to review.

Let's see: 2.75 million x $4.00 = $99 million plus the $99 million in cash makes the purchase price $110 million for 14,494 acres, which comes out to $7,589/acre. Of course, some of the work has already been done, making the assets more valuable. On the other hand, some of the producing wells have already declined in production. Whatever. We're still seeing $5,000 - $10,000/acre in the better Bakken areas.

Four (4) New Permits -- It Didn't Take Long for OXY to Get Going -- Oil For America With Another Permit in Stark County -- North Dakota, USA

Producers: CLR, Anschutz, Oil for America, and Oxy USA

Fields: Crazy Man Creek, Murphy Creek, Dimond, and one wildcat.

Oxy USA pretty much "owns" Dimond old field.

Oxy USA is a wholly owned subsidiary of Occidental Petroleum. That didn't take long. OXY announced it had bought 180,000 net acres from Anschutz in southwestern Dunn County just a few days ago.

The wildcat is in Stark County, issued to Oil for America, the folks looking to hit the Lodgepole reefs. This should be exciting.

Huge Lead Story at Finance!Yahoo -- An AP Story -- Not a Bakken Story

This is the headline: "Fewer Jobless Claims Cap Strong Week for Economy."

You have got to be kidding.

Here's the lede:

A further decline in the number of people applying for unemployment benefits capped a strong week for the economy.

Factories are producing more, shoppers are spending more and business executives and consumers are more optimistic. The latest reports, along with a tax-cut plan that Congress is set to pass, are leading economists to predict 2011 will be better than first thought and that hiring will pick up.

So, what are these rosy scenarios based on?

Weekly claims for jobless aid dipped by 3,000 to a seasonally adjusted 420,000 in the week ending Dec. 11, the Labor Department said Thursday.

You have got to be kidding.

And this was seasonally adjusted, meaning a "fudge factor" was used which affected the numbers. I doubt "they" picked a fudge factor to make the numbers even worse than they already are. But, hey, those 3,000 less claims are solid proof 2011 will be a better year. 

Thank goodness for the internet. And "they" call me inappropriately exuberant.

Update: same day, same hyperbole: Gold Prices Plummeting

In fact, gold prices dropped $20 while in the $1,370 range. That works out to 1.5 percent; that's hardly plummeting. That's called volatility.

Unemployment Rises to 8.2% in Massachusetts -- Not a Bakken Story

I'm in Boston, so I catch local news once in awhile.

This is the lead story on radio today: unemployment rises to 8.2 percent in Massachusetts.

For the last several months, the Boston Globe has run stories on how vibrant the Massachusetts employment picture is. I was always skeptical of those stories; there are a lot of green energy start-ups in the Boston area.

The reason I post this is because the local radios state that the unemployment rate of 8.2 percent is not all bad: "It's well below the national average." That's what they say.

Two comments:

1. It's pretty bad when folks can find a silver lining in unemployment numbers rising and now at 8.2 percent locally.
2. The national unemployment is back up to 9.6 percent. I don't know about you, but for me, there's not a huge difference between 8.2 percent and 9.6 percent.

And so it goes.

Huge Beef Plant in The Works in North Dakota -- Not a Bakken Story

South Korean investors and North Dakota beef association linking up to build huge facility that would process 1,200 head of cattle ... daily.

Is Kobe beef hyphenated?

Three Stories on More Housing in the Heart of the Bakken -- North Dakota, USA

A new mobile home park inside Williston city limits.

A human interest story on opening of a previously announced man-camp near Williston operated by Target Logistics.

A human interest story on grand opening / open house for a previously announced man-camp near Stanley, North Dakota, operated by Target Logistics.  I can't link the story directly; one needs to search for it when you get to the linked site.

These stories are interesting because there are three choke points affecting production in the Bakken: a) manpower; b) fracking crews (a manpower issue, actually); and, c) takeaway capacity (two issues -- one is obvious; the second is not -- by North Dakota regulation, oil companies cannot maximize oil production if flaring exceeds a certain threshold. North Dakota may flare (on a percentage basis) more natural gas than any other area in the world -- I'm not sure about that, but one can look it up if interested).

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.