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Bakken Watch: 15 ways to play a major North American oil discovery

Peter Kennedy Peter Kennedy, Stockhouse
1 Comment| July 25, 2014


They likely didn’t come for the exercise.

But oil sector analyst Keith Schaefer had investors scribbling feverishly during a lunch time speech to the Sprott Natural Resources Symposium in Vancouver Friday.

Conference attendees were quick to put pen to paper as the Oil and Gas Investments Bulletin (OGIB) publisher outlined a list of companies that he said will benefit from a major new oil play that straddles the border between Saskatchewan and North Dakota, and is located underneath the fabled Bakken Oil formation.

According to estimates by the U.S. Geological Service and published in OGIB, the Torquay could host 3.7 billion barrels.

“This is giving people a lot of excitement about what will be produced at the end of the day,’’ said Schaefer.

The Vancouver-based analyst said the Torquay, or Three Forks Formation is not a new discovery.

But it is only in recent years that companies such as Crescent Point Energy Corp. (TSX: T.CPG, Stock Forum) and Continental Resources Inc. (NYSE: CLR, Stock Forum) have been prepared to spend the dollars to drill into the formation, hoping that they can produce from it profitably.

Due to the use of horizontal drilling, and hydraulic rock fracturing, North Dakota now ranks as the second largest oil-producing state in American, behind Texas.

Torquay/Three Forks will not only double the size of the Bakken, it will also ensure energy independence of both the U.S. and Canada for years to come, while benefitting shareholders of the companies involved, Schaefer said.

The Bakken formation is located in the Williston Basin and covers 25,000 square miles across southern Saskatchewan, Montana, North Dakota and western Manitoba. It is currently producing at the rate of 900,000 barrels of oil per day.

As noted by Schaefer in a recent report, the Bakken formation is actually three layers of rock – upper, middle, and lower and is situated above the Torquay/Three Forks.

The underlying Torquay has four layers of tight rock, identified as TF1 (upper layer), TF2, TF3, TF4 (deepest layer).

Crescent Point Energy unveiled the Torquay discovery on its core Flat Lake area in southeast Saskatchewan back in mid-April.

That prompted the company to expand its land position to 880 sections, or 288,000 hectares, by acquiring CanEra Energy Corp. in April for $750 million.

Not to be outdone, Legacy Oil and Gas Inc. (TSX: T.LEG, Stock Forum) and Vermillion Energy Inc. (TSX: T.VET, Stock Forum) have also been buying private companies.

Schaefer said Torquay is up to 80 metres thick and offers fast paybacks of between 7-12 months on well drilling costs.

The following is a list of other companies that are expected to benefit from this discovery:

Spartan Energy Corp. (TSX: T.SPE, Stock Forum). It traded Friday at $4.04, leaving a market cap of $1.1 billion, based on 262.3 million shares outstanding. The 52-week range is $4.44 and 58 cents.

Surge Energy Inc. (TSX: V.SGY, Stock Forum). It trades at $8.25, leaving a market cap of $1.8 billion, based on 217.5 million shares outstanding. The 52-week range is $8.25 and $5.12.

Lightstream Resources Ltd. (TSX: T.LTS, Stock Forum). It trades at $7.40, leaving a market cap of $1.5 billion, based on 200 million shares outstanding. The 52-week range is $9.09 and $5.06.

Powder Mountain Energy Ltd. (TSX: V.PDM, Stock Forum). It trades at $1.12, leaving a market cap of $53.6 million, based on 47.8 million shares outstanding. The 52-week range is $1.62 and 67.5 cents.

Torc Oil & Gas Ltd. (TSX: T.TOG, Stock Forum). It trades at $13.70, leaving a market cap of $1.3 billion, based on 92.1 million shares outstanding. The 52-week range is $16.33 and $7.15.

Amazing Eagle Energy Corp. (OBB: AMZG, Stock Forum). It trades at $6.32, leaving a market cap of $192.2 million, based on 30.4 million shares outstanding. The 52-week range is $12 and $1.70.

Emerald Oil (NYSE: EOX, Stock Forum). It trades at $8, leaving a market cap of $530.3 million, based on 66.3 million shares outstanding. The 52-week range is $9.20 and $6.

Triangle Petroleum (NYSE: TPLM, Stock Forum). It trades at $11.52, leaving a market cap of $992.3 million, based on 86.1 million shares outstanding. The 52-week range is $12.48 and $6.37.

Kodiak Oil & Gas Corp. (NYSE: KOG, Stock Forum). It trades at $15.95, leaving a market cap of $4.2 billion, based on 266.5 million shares outstanding. The 52-week range is $16.25 and $9.26.

Northern Oil and Gas (NYSE: NOG, Stock Forum). It trades at $15.95, leaving a market cap of $973.6 million, based on 61 million shares outstanding. The 52-week range is $17.90 and $11.79.

Whiting Petroleum Corp. (NYSE: WLL, Stock Forum). It trades at $88.75, leaving a market cap of $10.6 billion, based on 119 million shares outstanding. The 52-week range is $91 and $48.58.

Schaefer said he owns shares in Spartan Energy.

Tags: OIL & GAS E&P ENERGY

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Comments

ddunkerley
BTW Keith's website is http://oilandgas-investments.com
1 star
August 12, 2014
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