Merlin:
Thanks for all the information about Brigham. This makes me feel secure in my recent stock purchase at these lower prices. I purchased this stock for the exact reasons you touched on and I also see this stock making a sharp rise over the next few years. I actually sold a couple of stocks (not O&G related) which had not performed over the past two years. I thought that this money would grow faster with Brigham as I keep up with their work ethics and mineral holdings in the Bakken. Let’s hope we’re both on the right track with our predictions.
Merlin KLotz said:
I began investing in BEXP when it was trading for $3. For my book, they are a pure Bakken play that has cracked the code. They are setting the pace on technology and are focusing on methods that return every possible barrel of oil efficiently even though their initial well cost may be higher than some others.
I have looked at all of the players in the Bakken and evaluated them based on Bakken/3Forks acres per dollar of share investment. BEXP is at the top of the list. I’m not buying the whole company so I just want my dollars to buy the most pure value possible.
Multiple analysts have targets on BEXP of high $30 to low $40. My back of the envelope math has a 5 year target of north of $200. Listen to their conference call for Q-1. I like Oasis as well because of their acreage position per share. However, a listen to the Oasis conference call and I felt I heard execs with great experience who will likely get it together eventually… but, while Brigham was crisp and knew where they were going and how, Oasis sounded like blind puppies… maybe we’ll do this and maybe we’ll do that…
I am overweight in the Bakken and intend to stay there. And, I am overweight in BEXP within the Bakken. I view today’s prices on BEXP as a bargain selling for at least a third under value. Wait to see if it goes up if you want but while I don’t believe in catching falling knives, I see this as buying the dip and I’m buying October options as well as stock… you can bet the institutions and Blackstone are! I consider Blackstone smart money and they now own 7%+ of the stock!
The one thing that frustrates me about Oil and Gas stocks is that you are buying a depleting asset drilled as a 30 year investment and the unsophisticated investor trades these stocks like a WalMart who just calls up the suppliers and refills their shelves. They drive the price of O&G producer stocks up or down penny for penny with the price of WTI crude! BEXP does the smart business thing to do by hedging much of their next 3 years production and are forced to take a mark to market write down in Q-1 of $30 million because the WTI price was $106 on 3/31. But accounting rules do not today permit them to recognize the benefit of the crude that will be produced a year from now that was hedged! Assume the price of Crude at 6-30 is $100, mark to market will give them a profit of say $15 million on hedge contracts! Accounting rules for hedge contracts should not be the same as for speculation.
You have to look past all this BS on all O&G Producers and recognize that companies like BEXP have a 15 to 20 year inventory of un-drilled prospects, are doing it right and setting the table for great production and growth.
If I were one with an oil and gas lease in the Bakken, I’d be re-investing every dime in Oil and Gas producers focused in the Bakken so that my lease revenue continued to work for me for years to come.