Answering A Reader's Question -- August 7, 2021

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

Disclaimer: in a long note like this, there will be typographical and content errors. This note has not been proofread. It will be proofread later.

Disclaimer: this is an opinion piece. It is not a factual news article nor a business article. Facts and opinions are interspersed. It is difficult to tell fact from opinion in a note like this.

Disclaimer: I do not have a hidden agenda. I try not to step on any toes when it comes to the Bakken (with some exceptions). I do not do any statistical analysis. I am inappropriately exuberant about the Bakken. I assume I have lost more money on investing in the Bakken than I have ever made and have pretty much learned my lesson(s). LOL But it so tempting. 

Disclaimer: I did not do a good job answering the reader's question about CLR. I may come back to it later. 

Updates

August 11, 2021: see comments -- this note sent by a reader -- brought up here for easier access and browsing --

Here is a picture of states' energy output.

• https://slopeofhope.com/2021/08/dont-mess-with-texas-2.html
  

If you "don't mess-with-Texas," then don't forget North Dakota.

Devon has always been a good operator and from a lease holding perspective one of the best.

I personally do not support dividend payouts because most firms need to strength their balance sheets. Moreover, it is not a deduction and is considered short term capital gains. Better to give stock to shareholders and retain cash for future investments. [Buffet model] 

Pay down long term debt, which adds to shareholders assets make more sense to me. How many oil & gas companies are debt free? Few, if any.

Perhaps other worthy players are, CLR; MR.O[il]; FANG and XEC.

It is long overdue, that the industry becomes more frugal in the use of its capital rather than the drive for production.

Original Post

A reader sent this note, anonymously, as a comment:

Whom is the best operator in the Bakken? How good is CLR?

My thoughts:

The "best operator" has a lot of connotations: best at drilling, best at completing, best at making money?

I follow the Bakken mostly from a holistic point of view, not just about making money. 

When I say some company has the best wells, or the worst wells, or something in between, it means that even before I see the results, I can almost guess the results of the well based on the operator and the oil field in which the well was drilled. Obviously, I am often wrong, but I always have a good idea of what to expect.

MRO and WPX have the best wells (see note above), but they are drilling in a very small area and the areas they are drilling in seem to simply be very good areas. Whether they were lucky or good, I don't know; probably a combination of both. Not all companies with great reputations have had success in the Bakken: think OXY and Chesapeake from years ago.

MRO is very, very exciting because they are teaching me about re-fracks and how new fracks affect older, producing wells. 

CLR is the face of the Bakken. The company has the personality of Harold Hamm. CLR is "damn the torpedoes, full speed ahead." If he has the money, Harold Hamm will drill. I always expect his wells to be middling; not great, not poor, and after years his revenue stream / his production stream should be second to none in the Bakken. I never expect to see a great Bakken well, but I am occasionally surprised. CLR just drills a lot of "steady Eddy" wells. CLR knows the Bakken the best; they have wells across the entire northern Bakken. That's why they have great wells and poor wells; they are willing to drill everywhere. I suppose the best thing to say about CLR is to simply take a 30-year horizon, accumulate a few shares every month and forget about it. Thirty years later your heirs will thank you for it. But again, I'm starting to mix investing with trading with drilling with making money. Those are four different things. So much could be written about CLR -- so many things Harold Hamm has pioneered in the Bakken.

Slawson, privately held, has really, really good wells. They know what they are doing. To some extent, perhaps they have really good locations, but that's part of the game. They don't drill often but when they do I anticipate a great well. I pay attention to what they do. 

EOG: they really started out with a bang in the Bakken. They found a great site in the Parshall, then moved on to the Permian. Among the Wall Street folks, EOG is considered the gold standard among shale companies. But I don't know much about what they are doing now that they have left the Bakken and focused on the Permian. I look forward to seeing what they do when they drill again in the Bakken.

Whiting: I had great expectations for this company early in the boom. Things did not pan out. I don't know what to say about them any more. 

Hess: great story. Early on in the Bakken they were average at best. I was disappointed, but in 2019, Hess really started reporting some great wells. That suggests to me that the Bakken is simply not about being lucky and being in the right spot. Hess is doing something to get better wells. But as an investment one is drilling in a company who drills globally; it is not a pure-play Bakken company.

Enerplus: this one is really, really exciting. Things seem to be happening with Enerplus this past year. I always look forward to their wells. Great wells. Mega-pads. I just don't know whether to invest in them.

Devon: I just wrote a long piece on Devon. This company, from an investment point of view, really excites me. I won't write more on Devon here. I'll refer you to the linked post.

Petro-Hunt: really, really good wells, but not very many and located in only a small area, the Charlson oil field. 

XTO: have completely lost the bubble on XTO (part of XOM). Maybe I will come back to this after I look at my notes.

Kraken: [added. I forgot them in the original post.] Kraken has very, very good wells. But I consider them a niche player; don't know much about them. But they really do have great wells in areas that I did not expect to do so well, which suggests they also know what they are doing.

There are many, many more companies drilling in the Bakken but pretty much niche players. But some of those smaller players are doing very, very well. Kraken comes to mind. They have great wells.

Bottom line:

• best operators as far as simply reporting consistently great wells: MRO, WPX, 

• best operator reporting consistently good wells: CLR
  

• among the small names with consistently great wells: Petro-Hunt, Slawson, Enerplus, Kraken
  

• the big companies that are consistent: BR (COP), Hess,
  

• EOG: not much of a player any more in the Bakken 

• companies that are really fun to watch right now with regard to their wells: WPX (Devon), Enbridge
  

Investing and / or trading: mom-and-pop retail investors / traders will never beat the pros (there are exceptions). I advise my children and extended family members who are interested in investing/trading to let professionals manage 90% of their estate or more. Mom-and-pop retail investors need to know they risk completely whatever they invest.

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