For Investors Only -- Filloon -- What to Buy in 2012 -- A Series of Articles -- The Bakken, North Dakota, USA

Part One.

This is Mike's thesis:

The year 2012 could be a big one in the Bakken. Many of these names are cheap based on $100 oil, and if there is some certainty gained from Europe, these names will carry a higher valuation. The price garnered from Bakken oil will trade higher as demand in the United States rebounds. More importantly is the pipeline from Cushing to the coast. If and/or when this is completed, WTI will trade closer to Brent, and Bakken oil will trade with WTI.

I agree.

Companies he highlights, and some data points:

Triangle Petroleum

• the majority of TPLM's wells are in or near Whiting's Hidden Bench prospect
• the average IP for Whiting's HB prospect: 2,669 boepd

Oasis

• some very good acreage in Indian Hill
• I have emphasized Indian Hill over the past few weeks

Part Two

Bakken names are also insulated from water shortages that have made things difficult for oil producers in the Eagle Ford or Permian Basin. A mild winter in North Dakota and Montana has helped to get these names off to a good start. Look for the Bakken names to come in at the top end of expectations in the fourth quarter.

The company highlighted in Part 2: Geo Resources.

Part Three

The next two have little to do with production, but receive a portion of revenues from the Williston Basin. Flotek has started out the new year well. In my opinion, this is the best name in the fraccing fluids space. Frac fluids have been developed over the years by oil service companies that have performed and improved fracing.

Mike says:

Market share of the frac fluid space is dominated by these big oil service companies (numbers rounded):

1. Schumberger: 36%
2. Halliburton: 24%
3. Baker Hughes:11%
4. Newpark: 8%

Folks may want to comment on my top ten list of fracking companies in the Bakken. This list is linked in the sidebar at the right.

Part IV

Bakken oil producers ended the year on a high note as the weather remained mild. In fact, North Dakota is having one of its warmest winters in four decades. With no snow on the ground in the Williston Basin, drilling and completing are ahead of schedule, and it would be fair to say most will come in toward the top end of earnings estimates. This was the opposite of what was seen last winter.

That's right; this has been an incredible winter. But the big story is not that a mild winter has made it better for the oil patch, but that on top of this, the oil patch is much better prepared -- lots of infrastructure went in over the summer "just in case" and now this will pay off even more if the mild winter holds.

Mike says:

For those unfamiliar, southwest Mountrail, northeast McKenzie, and northeast Dunn counties all border what I think is the Bakken/Three Forks sweet spot.

I assume Mike has pointed that out before, but it really jumped out at me: I have been blogging for the past few months that the Bakken bull's eye is northeastern McKenzie County, northeast of Watford City, and this is where the activity will be headed this year (2012). My gut impression is that it will be even bigger than Whiting's Sanish, partly because drillers have gotten a lot better since the boom began four or five years ago.

Companies highlighted by Mike in part IV:

NOG

A Whiting well in its Tarpon prospect was the best news Northern got in 2011. Whiting recorded the highest IP (initial production) rate of any well in the Williston Basin at 7009 Boe/d and Northern has non-operated working interest.

KOG: Mike has important things to say to investors about KOG in this article. He took his profits earlier (he doesn't say at what price he sold, but probably in the $9.50 range) but says he will get back in if KOG pulls back to $8.00 or so. I used to use $6.00 as my data point for accumulating more shares.


Disclaimer: this is not an investment site. See disclaimer at top of sidebar at the right. Make no investment decisions based on this blog.