Investment Update On Three Operators In The Bakken -- SeekingAlpha -- August 25, 2018

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This is a few weeks old, but some folks may be interested.

From SeekingAlpha: US shale -- NAV analysis of Williston Basin E&Ps -- 1Q18 update -- NOG, OAS, OAS.

Contributor: Andre Kovensky.

Some data points:

• Whiting Petroleum is undervalued, on July 2, 2018: $50.41
• Oasis Petroleum is about fairly valued, on July 2, 2018: $12.64
• Northern Oil and Gas is about fairly valued, on July 2, 2018: $3.11

Additional data points, since the contributor's last report:

OAS sale of non-strategic acreage:

65,000 acres for $283 million. Production from this acreage is 4,400 BOE per day. Applying a market metric of $40,000 per BOE of daily production, $176 million of the sale price can be attributed to the current production. Thus, OAS received $1,646 per acre for whatever future drilling locations are on the acreage. My model assigned zero value to this acreage since I assumed it would not be drilled.

NOG: NOG's net debt / 2018E EBITDA is now in line with WLL and OAS.

The group:

The group has benefitted from a market sentiment change away from Permian Basin E&Ps toward Eagle Ford shale and Williston Basin E&Ps. Permian E&Ps are receiving large price discounts for their oil due to pipeline takeaway congestion, where Eagle Ford and Williston E&Ps do not face this issue. Also, from a technical standpoint, WLL and OAS are two of the highest weighted E&Ps in the XOP ETF, which I believe has created material incremental demand for the shares. NOG’s management changes and balance sheet restructuring have enabled the market to look at its assets and profitability through a clearer lens, removing any bankruptcy fears. Also, NOG was recently added to the Russell 2000 which creates material incremental demand for the shares.

EBITDA:

Williston Basin production is heavily weighted to oil. Also, needed Williston Basin pipeline capacity finally came online in 2017 leading to reductions in basis differentials. Together, these factors have made Williston Basin E&Ps very profitable. NOG is now generating some of the highest EBITDA per BOE among all the US shale E&Ps I follow. NOG’s EBITDA per BOE increased by about $6 in 2018 Q1 versus 2017 Q4. OAS also generates very high EBITDA per BOE, increasing $2 in 2018 Q1 versus 2017 Q4. WLL’s profitability is behind NOG’s and OAS’s primarily because of WLL’s Niobrara shale production (which WLL wants to divest).

Natural gas:

Nat gas realizations are not material to profitability. But, for those of you interested, WLL had weak price realizations at a $1.20 discount to the benchmark Henry Hub price.

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