Motley Fools: What a Difference One Well Can Make -- Bakken, North Dakota, USA

I have posted many times on my blog two things about the oil industry in North Dakota:

• Because many of the pure-Bakken-play companies are so small, one well can make a huge difference; and,
• I don't think oilmen really worry about past wells or IPs of previous well; all they want is the cash flow to keep drilling, hoping for that one big well (and when they hit it, they will move on again)

Well, today, I see that the Motley Fools have an article echoing that first point. Interestingly enough, they cite Credo Petroleum in that article, and just yesterday I added CRED to my Bakken market basket. (I added it to the sidebar at the right; it does not mean I purchased shares in CRED.)

Motley talks about the wells that Credo has now reported.

Their final paragraph is interesting:

In short, you can take a lot of the risk out of even the most speculative realms of investing. The less you pay up for potential upside, and the more downside protection you have in the form of cash or other tangible assets that are unlikely to be frittered away, the less speculative the activity becomes.

By the way, just after posting the above, I ran across an interesting slide in a recent Abraxas presentation.

Abraxas has a bar graph comparing the number of net Bakken acres oil companies have vs their enterprise value. I can't reproduce the graph here but here are the numbers (the graph provides much more impact and if any interest at all in investing in the Bakken, you should take a look):

Net Acres in the Bakken/Enterprise Value (EV)

• AEZ: 275 net Bakken acres/$1 million EV
• GEOI: 175 net
• BEXP: 170 net
• KOG: 160 net
• NOG: 150
• CLR: 100
• WLL: 60
• AXAS: 55
• NFX: 48
• SM: 47
• DNR: 46
• EOG: 40
• HES: 39
• MRO: 25
• XTO: 25
• MDU: 23
• STR: 10
• COP: 2

If one is interested in investing in the Bakken, this slide speaks volumes. 

Bottom line: one or two great wells will move the needle on GEOI, BEXP, KOG, NOG, and CLR.  That's probably true for TPLM and CRED, also. With 22 rigs drilling, CLR has the best chance of hitting some great wells. BEXP has a history of breaking IP records. AEZ was bought by Hess, recently, and GEOI moves to the top of this list.