Ride the boom with these five Bakken oil shale stocks

David Zeiler
0 Comments|April 25, 2012

With activity ramping up rapidly the Bakken oil shale boom could turn out to be just as big, if not bigger, than the California gold rush of 1849

The Bakken oil shale boom is the opportunity of a lifetime.

With activity ramping up rapidly - production has soared from 100,000 barrels a day in 2005 to 494,000 barrels a day in February - the Bakken oil shale boom could turn out to be just as big, if not bigger than the California gold rush 1849.

Last week we told you about how the Bakken oil shale boom has affected Williston, ND. The town has an absurdly low unemployment rate of 0.8%, and the average pay for the oil company jobs is about $90,000.

One way to take advantage of this boom yourself would be to move to North Dakota.

But with dozens of companies flocking to the region, a much easier way to get in on the boom is to simply invest in some Bakken oil shale stocks.

The allure of big profits has attracted dozens of companies to the Bakken oil shale formation. The list ranges from industry giants like Exxon Mobil Corporation (NYSE: XOM, Stock Forum) and ConocoPhillips (NYSE: COP, Stock Forum) to pipeline companies like Enbridge Inc. (NYSE: ENB, Stock Forum).

With oil prices expected to keep rising, and the production in the Bakken not expected to peak until 2020, it will be hard not to make money in Bakken oil shale stocks.

"Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska," Harold Hamm, CEO of Continental Resources Inc. (NYSE: CLR, Stock Forum) - one of the major players in the Bakken oil shale boom -- told The Wall Street Journal last October. "We expect our reserves and production to triple over the next five years."

Still, some Bakken oil shale stocks will benefit more than others.

For example, the really big companies like Exxon, with large global operations, will see less of a boost than companies with operations concentrated in the Bakken and other North American shale deposits.

Money Morning has taken a look at these Bakken oil shale stocks and found five companies positioned to benefit most from this historic find's tremendous potential.

Top five Bakken oil shale stocks: HES, WLL, TLLP, OAS, GEOI

Hess Corp. (NYSE: HES, Stock Forum): While Hess is a somewhat well-known oil company, its $19 billion market cap makes it far smaller than the giant oil majors. Hess has operations in the Eagle Ford and Utica shale oil deposits in addition to the Bakken. The company sees its U.S. shale oil operations growing from 17% of its production this year to 27% by 2017. Bakken production will lead the charge, with production in 2012 alone expected to double. Furthermore, Hess has the ability to move its oil out of the region by rail, a huge advantage given the current shortage of pipeline capacity out of the Bakken region. HES has a relatively low P/E of 11.08, and a one-year average price target of $80.05. Analysts like Hess, with 85.7% of those covering the stock rating it a "Buy." With the stock having slumped from $67 in February to $55 as of Friday, it looks to be oversold. It pays a dividend of 40 cents for a yield of 0.70%.

Whiting Petroleum Corp. (NYSE: WLL, Stock Forum): Whiting is one of the biggest producers in the Bakken, with total acreage of 683,000. Whiting is drilling in 2,264 locations in the Bakken. WLL expects its growth in the region to continue at a brisk pace. And Whiting has been particularly adept at controlling costs to make the most of the oil it's drilling. Less than two weeks ago, research firm CLSA upgraded WLL from "Outperform" to a "Buy." WLL has a P/E of just 13.06 and a PEG ratio of 0.63. It has a target price of $69.52 and closed at $53.72 on Friday. Whiting pays no dividend.

Tesoro Logistics LP (NYSE: TLLP, Stock Forum): Tesoro Logistics is a pipeline company created by Tesoro Corporation (NYSE: TSO, Stock Forum) last year. Tesoro Logistics exists primarily to transport the parent company's oil out of the Bakken region, though it can work with other producers. TLLP is the sole supplier for Tesoro Corporation's North Dakota refinery. Tesoro's P/E is a bit high at 32, but the company's growth prospects are excellent. Annual EBITDA expected to grow from $53 million when it went public a year ago to more than $100 million in 2013 -- an 88% increase in three years. As a Master Limited Partnership, TLLP is also required to pass on all of its profits to shareholders. That translates to a tidy dividend of $1.45 and yield of 4.20%. Tesoro increased its dividend 4% just last week. It has a one-year target of $37.33 and closed Friday at $35.45.

Oasis Petroleum (NYSE: OAS, Stock Forum): If you want a pure play Bakken oil shale stock, Oasis is it. All of its operations are in the Bakkan region, and its acreage is among the best. Some analysts believe Oasis could catch up to such major Bakken players as Whiting Petroleum and Continental in a few years. The company reported last week a 16% increase in Q1 production from the previous quarter, but that was an impressive 118% jump year over year. Oasis has a somewhat elevated P/E of 35.66, although its forward P/E is just 11.4 and its PEG ratio is 0.54. OAS closed Friday at $30.72, and has a one-year target of $38.90. Oasis does not pay a dividend.

GeoResources Inc. (NYSE: GEOI, Stock Forum): This small cap ($781 million) has most of its operations in Bakken and Eagle Ford. GeoResources is said to considering some of its legacy assets to concentrate more resources on those two key shale oil areas. GEOI's proven reserves grew 20% last year. GeoResources has a solid balance sheet, with no debt and $39 million in cash. In the first quarter, revenue leapt 56% year over year, from $27 million to $41 million. While the stock is up 89% in two years, the potential for continued growth remains strong. The P/E is 25, but the PEG ratio is just 0.61. The one-year target price is $36.90, with GEOI closing at $30.68 on Friday. The company pays no dividend.


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