Market Action For Selected Bakken Operators Over The Past Six Months -- February 23, 2018

Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on what you read here or what you think you may have read here.

Dislcaimer: this was done quickly and there will be typographical and factual errors. Opinions are interspersed with "factual data." If this is important for you, go to the source.

Disclaimer: The exact share prices were picked out quickly and may be off by a few pennies but, in general, they are close enough for purposes of the blog.

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This is kind of interesting. This blog is not an investment site and I really don't care about investments in the Bakken or the oil industry all that much in the big scheme of things with regard to the blog. I've talked about that many times and I think I talk about it on the welcome/disclaimer. It's hard to follow or understand the Bakken if one doesn't follow the (stock) market; US politics; and, global geopolitics. This post concerns the stock market.

Almost exactly six months ago, a "Karl Francis, long only" had a fairly long contribution to SeekingAlpha last August 23, 2017.

IP30 Data in the Bakken: from a SeekingAlpha article last August 23, 2017.

Karl Francis describes himself as "long only."

I thought the article was fairly balanced overall but I did not read it closely. One observation the writer made:

Average IP30 has been relatively flat from the second half of 2014 to the first half of 2016, but made a significant jump in the 2nd half of 2016, lifting the 2016 average to 690 bopd. There are two main reasons for this. The first is the extraordinary IP30 performance jump of a few companies, notably WLL and OAS. The second is the strongly falling contribution of under-performing XTO wells (from 83 new wells with IP30 in the first half to 20 in the second half of the year).

Disclaimer/note: as an aside, I don't know if the writer defined "IP30" nor do I know if he took into account the phenomenon of "constrained production" in the Bakken. I would like to see the IP30 in the Bakken defined as the max IP30. The first six months of unconstrained production in the Bakken is probably the best parameter (UP6M), followed by the "EUR type curve" once we have the UP6M.

Note: I find it interesting that the industry continues to use parameters suited for vertical, conventional wells instead of migrating to parameters better suited for horizontal, fracked, unconventional wells. 

Note: as another aside, I don't believe the writer took into account short laterals vs long laterals. In this case, it probably does not matter because my hunch is that 99.9% of all wells in his sample were long laterals, but if not, the small number of wells sampled (as the writer acknowledged) would have a huge affect if even a few short laterals were included in the data pool. 

Finally, done with disclaimers and notes: Although I thought it was a fairly balanced article (again, I didn't read it closely) I was surprised by how negative most of the comments were.

I assume the majority of folks that come to SeekingAlpha follow the market and probably invest in the market. Of those who invest in the market, I would not be surprised if a large percentage are short term traders ( horizons less than six months). 

It seems most folks commenting were looking at the Bakken as a whole from an investment point of view. I think they would have done better had they used the data to separate the wheat from the chaff, separate out the better companies from the others. (Defining "better" is in the eye of the beholder; it's very, very difficult, and the definition would vary among folks based on their knowledge of the oil industry).

Interestingly, in this case, it would not have mattered a whole lot, trying to separate out the better companies. With minor exceptions, for short term investors, the appreciation at the "high water" mark was exceptional (I doubt it got the attention of CNBC). At six months the appreciation is still remarkable (again with some exceptions). Whiting, up 60% at six months, as perhaps the best example, and, oh, by the way, the writer singled out Whiting as one of two Bakken operators with the "best wells." Another open book test.

As an aside, the biggest exception at six months was Newfield. The other poor performer was XOM (XTO is a subsidiary). I can't speak to Newfield, but I've long considered XOM to trade like a utility company, not an oil company. [Actually the biggest exception was HRC, but that's another story for another day.]

So, without further ado, a look at the share prices of the companies mentioned in the linked article below, at three months and six months after the article was posted.

	Aug 25, 2017	High During The Six-Month Period	Percent Change At The High	Feb 22, 2018	Percent Change Over Six Months
Hess	38.36	54.72	43%	47.08	23%
Whiting	17.68	31.38	77%	28.26	60%
CLR	33.42	58.33	75%	48.44	45%
XTO (XOM)	76.33	89.07	17%	75.86	-1%
Oasis	7.27	11.09	53%	8.37	15%
COP/BR	43.30	60.49	40%	54.91	27%
QEP	7.50	11.05	47%	8.63	15%
Statoil	18.62	24.22	30%	22.59	21%
EOG	84.62	118.47	40%	107.09	27%
MRO	10.99	19.28	75%	15.18	38%
SM Energy	13.54	26.84	98%	19.31	43%
Newfield	25.09	34.75	39%	23.46	-6%
WPX	9.91	15.76	59%	14.34	45%
Enerplus	8.76	11.65	33%	10.47	20%
Zavanna
Petro Hunt
HRC