I have always appreciated Z Man's analysis of oil companies. This one is perhaps one of his best -- a bit of personality, a bit of fire, a bit of humor.
And a lot of data.
From my perspective, the pure Bakken-play companies are still in growth mode, and quarterly earnings are not as important as a) cash flow; b) total acreage; c) production increase yoy; and, d) proved reserves.
With that in mind, some data points about acreage taken from the linked article and from the NOG press release:
- NOG has 168,000 net acres at end of 2011
- carries cost of those acres at $1,832/acre
- NOG is trading at $9,413 per "straight" acre
- KOG trades at ~ $20,000 per "straight" acre
- NOG, on a 4Q production basis, trades at $5,000/acre
- KOG, on a 4Q production basis, trades at $15,000/acre
With regard to proved reserves, NOG's nearly tripled, up 198% yoy. For my purposes: reserves tripled.
Assuming one can stay in business (cash flow), reserves may be the most important datapoint in the oil sector. Tripling one's reserves and keeping average cost/acre well below that of competitors is no mean feat.
I don't hold any NOG. I have in the past, and may in the future, but not anytime soon. This is not an investment site; see disclaimer.
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