American Eagle Energy BUY Target Price $6 Next Spring Not Today

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.


Target: US$6.00

AMZG is an independent E&P company focused on
developing the Bakken and Three Forks shale oil
formations in the Williston Basin of North Dakota and
Montana. The company is based in Denver, CO.

Energy — Oil and Gas, Exploration and Production
Investment recommendation
We like AMZG for its inventory of relatively low-risk, high return Bakken
and Three Forks (TF) locations in the Williston Basin (WB). The
company has ~46.8K net acres in Divide County, ND, and while IP rates
and EURs are not as high as in deeper parts of the WB, lower costs
provide attractive rates of return. With new financing in place and the
stock getting essentially no credit for its undeveloped acreage at its
current price, we believe AMZG offers promising risk/reward.
Investment highlights
 AMZG laid out what we believe to be a prudent base-case 2015
capital plan, in which it intends to run one rig starting at the end of
Q1/15 and keep it going for the rest of the year. That would yield 10
net wells and equate to ~$60M in capex. At that pace of
development, the company would be able to grow production as
2015 progresses; we estimate ~3.1 MBoe/d (47% growth) for 2015.
The company said it would think about scaling up activity at a ~$90
WTI oil price and could bring on a second rig quite quickly.
 Following the positive results from the Eli well (405 Boe/d 30-day
IP), AMZG intends to use slickwater fracs for the Byron and Shelley
Lynn wells. Those wells are scheduled to be fracked in November.
The company estimates it will bring on 4 gross (3.7 net) operated
wells by the end of 2014. It could possibly add 2 additional gross
(1.3 net) wells if the Shelly and La Plata State are online in time.
 Liquidity of $84M at the end of Q3 should be more than sufficient to
fund the $60M capex program.
Our new $6 price target represents a 30% discount to a ~$8.40 NAV

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is American Eagle Energy Corporation(AMZG), which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in AMZG.

A key reason for this move has been the negative trend in earnings estimate trend. Although for the full year, we have not seen any estimates moving down or up in the past 60 days, the consensus estimate has moved lower, going from 25 cents a share a month ago to its current level of 21 cents.

Also, for the current quarter, American Eagle Energy has seen 1 downward estimate revision versus no revision in the opposite direction, dragging the consensus estimate down to 4 cents a share from 6 cents over the past 60 days.

Whiting Petroleum

WLL : NYSE : US$83.53
Target: US$108.00
Whiting Petroleum engages in the acquisition,
development, exploitation, exploration, and production of
oil and gas properties. The company primarily focuses in
the Permian Basin, Rocky Mountains, Mid-Continent, Gulf
Coast, and Michigan regions of the United States.

Energy — Oil and Gas, Exploration and Production
Investment recommendation
We believe WLL has substantial upside given its ~845K net acres (pro
forma) in the core of the Williston Basin (WB), which can be further
exploited via downspacing and enhanced completion techniques. The
pending acquisition of KOG bolsters its inventory in the core of the WB.
Strong production growth in the Niobrara excites us as well. WLL trades
at a discount to its peers that we consider unwarranted. In our view,
continued solid execution will result in a narrowing of the valuation gap.
Thus, we initiate coverage with a BUY rating and $108 target.
Investment highlights
 WLL is testing enhanced completion techniques in its latest
Bakken/Three Forks (TF) wells; if successful, we believe they can
add meaningful upside to EURs and rates of return. Additional tests
of slickwater fracs and coiled tubing completions are planned for
this year. Cemented liner/plug & perf completions have already
yielded a 23% improvement in EURs at little incremental cost.
 The pending acquisition of KOG would enhance WLL’s inventory in
some of the best areas of the WB. The combined entity would have
>3,400 net future drilling locations. WLL plans to up the rig count to
26 by the end of 2015. It also intends to lower KOG’s average well
costs to $8.5M from $9.2M, which we consider very achievable. The
deal should be accretive on all relevant metrics starting next year.
 We foresee rapid production growth in the Niobrara (~2.5x y/y
growth in 2015E). At its Redtail acreage, it is testing tighter spacing
in the B bench and also wells in the C bench; results from its 32-
well Horsetail Pad should come in January. Success there could
double its Redtail inventory to ~3,300 net locations from ~1,650.
 The company should have ample liquidity to fund continued drilling
efforts in the WB and Niobrara. Even with the assumption of KOG’s
~$2.3B of debt, the balance sheet remains in solid shape.
Our $108 price target represents a 10% discount to a ~$120 NAV

Northern Oil and Gas

NOG : NYSE MKT : US$17.11
Target: US$19.00

Northern Oil and Gas engages in acquisition, exploration, exploitation, and development of oil and natural gas properties in the US Rocky Mountains. Its core focus is the Middle Bakken formation in the Williston Basin of Montana and North Dakota. Its secondary focus is Red River and Mission Canyon formations in Montana

Energy — Oil and Gas, Exploration and Production
Investment recommendation
NOG is a Williston Basin (WB) Bakken/Three Forks pure-play with a non-operated model. The company is one of the largest non-operating participants in the play and a natural clearinghouse for non-operated working interests. We see good value in the stock and believe a resumption of production growth, which is now happening, should be the recipe for a higher share price.
Investment highlights
 NOG announced that Q3/13 production is expected to average ~13MBoe/d, a 19% Q/Q increase. This soundly beat our 12.2 MBoe/d and consensus of 12.3 MBoe/d. During the quarter, the company added 147 gross (12.1 net) wells to production with an additional 260 gross (18.8 net) wells that were drilling or awaiting completion at the end of the quarter. NOG had a producing well count at the end of the quarter of 1,585 gross (133.5 net).
 NOG expects Q3 realized price per Boe, including the effect of settled derivatives, to be in a range of $82.00 – $83.00, and its LOE to be in a range of $9.50 – $9.75/Boe.

North Dakota : Bakken Makin ‘ Hotspot

English: An Oil Pump in western North Dakota

English: An Oil Pump in western North Dakota (Photo credit: Wikipedia)

By George Leong, B.Comm. for Profit Confidential

When it comes to petro-dollars, North Dakota isn’t the first place you might think of—but soon it will be. The aggressive efforts to develop shale oil have turned North Dakota into one of the top states for growth and employment nationwide.

Since oil first started to be processed from shale formations, the development has been rapid. And today, the amount of oil produced from shale via the fracking technique (the breaking of shale formation using a water, sand, and chemical mixture to access the commodity below) has intensified.

In fact, if you add the proposed oil from Canada’s oil sands, the U.S. will become much less dependent on oil from the volatile Middle East. Texas oil magnate T. Boone Pickens is probably giddily thinking of the investment opportunities, as he has long been an opponent of oil from the Organization of the Petroleum Exporting Countries (OPEC), the largely Middle Eastern oil cartel.

A clear indication of the impact of shale oil can be seen in the monthly report from OPEC. According to the report, OPEC predicts a decline in its market share due to the influx of shale oil (Source: Lawler, A., “OPEC to lose market share to shale oil in 2014,” Reuters, July 10, 2013.)

The growth of shale oil will likely only quicken as new sites are developed and related technology improves. In fact, after Texas, North Dakota is the next biggest producer of oil nationwide—accounting for roughly 10% of the U.S.’s current daily production. (Source: Austin, S., “North Dakota Oil Boom,”, August 13, 2012, last accessed July 11, 2013.)

And while there are numerous players in the production of shale oil, one of the key ones in North Dakota’s Bakken oil fields is Continental Resources, Inc. (NYSE/CLR). The company controls nearly one million net acres in the region.


In the first quarter, Continental Resources reported net production of about 121,500 barrels oil equivalent (BOE) daily, which included 76,900 BOE from its Bakken shale play in North Dakota and Montana. And the projections are extremely bullish, as the company has targeted a whopping 603,000 BOE for its North Dakota wells, along with 430,000 BOE for its wells in Montana. (Source: “Continental Resources Reports First Quarter 2013 Results,” Yahoo! Finance, May 8, 2013, last accessed July 11, 2013.)

If these numbers pan out, it would become one of the world’s top oil-producing areas, accounting for around 3.3% of OPEC’s current total daily production.

Another key player in the Bakken region is Whiting Petroleum Corporation (NYSE/WLL), with close to 600,000 net acres in North Dakota.

So while OPEC will continue to dominate the global oil market, the state of North Dakota is becoming the biggest big-oil sensation in North America since the tar sands in Alberta. That’s bad news for OPEC, but good news for investors.




The Hype About America’s Energy Boom

Oil Guru Destroys All Of The Hype About America’s Energy Boom




The gap between production and consumption is 9 million barrels of oil a day. “It is unlikely that the U.S. will become energy independent,” Berman argues.

The gap between production and consumption is 9 million barrels of oil a day.

Arthur Berman

Read more:

Goldman Sachs: The Shale Oil Revolution

Shale Gas Outrage Rally

Shale Gas Outrage Rally (Photo credit: Marcellus Protest)

The Shale Oil Revolution Is Real, And It Will Have A Massive Impact On The Global Economy

We are seeing calls that, thanks to shale drilling, the U.S. is poised to become the world leader in oil production, leading some to begin invoking “Saudi America.”

Today, Goldman Sachs analyst Kamakshya Trivedi, weighed in on the global macro implications of this phenomenon in a note titled: The shale revolution is changing the global energy landscape.

The note actually goes further, talking about how the entire economic landscape could potentially change.

The main impact, they write, is that oil prices will no longer prove a brake on growth:

…shifts in production are gradually loosening the oil price constraint that has been a persistent feature of the global economy. If global demand growth can recover, the risks that it will be choked off by rising oil prices are receding.

This will produce a knock-on effect for household incomes in the West, while blindsiding petro-states:

The drag on household incomes in the developed world from this source should end.

The flipside of the improving terms of trade for these consumers, of course, is a less friendly picture for producers and producing countries, where the sustainability of spending based on sustained high oil prices may come under more scrutiny.

Meanwhile, central banks will be able to shift their focus from containing headline inflation:

Rising energy prices have affected core inflation measures to a degree, influencing the inflation outlook even for central banks, like the Federal Reserve, that have focused more on underlying inflation measures. As a result, lower ongoing energy inflation means that monetary policy may be easier on average than it otherwise would have been.

Finally, here in the U.S., they estimate production will further equalize our trade balance by an amount equal to 1.2% of GDP:

The lion’s share of this would come directly from improving net energy exports, similar to the forecast increase of $136bn for net imports from our Energy team over this period, with a smaller increase coming from improved competitiveness of US manufacturers.

They conclude by depicting just how truly tectonic America’s shale story can be — the third-largest on record:

goldman shale

Goldman Sachs

So everyone’s finally got the message that the Eagle Ford is the place to be. Here’s total well starts through this spring

So everyone's finally got the message that the Eagle Ford is the place to be. Here's total well starts through this spring

EOG Resources holds the most acreage in the play. It’s stock growth over the last two years reflects this privileged position


People now think America could become the next Saudi Arabia of oil production

One of big reason is North Dakota‘s Bakken formation, which we showed you around earlier this year.

But another huge factor is the Eagle Ford formation in Texas, which many believe has become the most profitable oil play in the world:

Related articles

Guide To Fracking 101

Texas Barnett Shale gas drilling rig near Alva...

Texas Barnett Shale gas drilling rig near Alvarado, Texas (Photo credit: Wikipedia)

Nov 10

Fracking: A Brief History

Hydraulic fracturing involves propagating the fractures in a rock layer using pressurized fluids in order to release oil and gas that isn’t economically viable to extract using traditional drilling techniques. While fracking was technically first used in 1947, modern fracking techniques like horizontal slickwater fracking weren’t commercially used until 1998 in the Barnett Shale.

The process works by pumping fracturing fluids – like slickwater, gel or foam – into a wellbore at a sufficient enough rate to fracture the rocks below. When these fractures occur, the operator injects proppants into the well to prevent the fractures from closing when the fluid pressure is reduced. And finally, oil and gas leaks from the fractures into the well for extraction [see also Four Little Known Factors Driving the Price of Crude Oil].

Fracking has made it possible to reach significant oil and gas resources that had previously demonstrated a poor flow rate and weren’t economically accessible. In particular, the technique has become very popular for extracting oil and gas from tight sands, shale and coalbed methane formations where older oil wells were no longer effective.

Fracking Today

The International Energy Agency estimates technically recoverable shale gas resources of about 208 trillion cubic meters, or 7.3 quadrillion cubic feet. Meanwhile, the same agency estimates the natural gas production will increase from 3,276 billion cubic meters to some 5,112 billion cubic meters by 2035, as techniques like fracking become more common.

This enormous potential is just beginning to hit the market as fracking grows in popularity in the U.S. and, to a slower extent, abroad. The U.S. Energy Information Administration predicts that some 7.6 trillion cubic feet of shale gas will be produced in the U.S. in 2012, up 11.6% from 2011, with overall U.S. natural gas production expected to rise 4% to 5% per year [see also A Deeper Look At America’s Commodity Industry].

The largest fracking opportunities in the U.S. lie in shale plays, including:

  • Barnett Shale, Texas
  • Bakken Shale, North Dakota
  • Haynesville Shale, Louisiana
  • Marcellus Shale, Appalachian Basin
  • Raton Basin, Colorado

Despite the success in the U.S., fracking has been slow to spread to other countries around the world. Many governments, like those in Europe, Asia, Africa and South America, own mineral rights that create little incentive for private parties. The practice was also temporarily suspended in Britain after a series of small earthquakes led to some concerns.

Environmental Woes

Fracking can impact the environment in a number of different ways, ranging from water contamination to increased seismic activity. These concerns have led to significant opposition to fracking in many areas, both inside the U.S. and in other countries around the world. Many of these studies are also ongoing, including a major environmental impact study in the U.S.

Water contamination is a principal concern and can easily occur during the fracking process. Accidental spills at the surface, leakage into a shallow aquifer through imperfect sealing, leakage to shallow aquifers through the rocket, and discharge of insufficiently treated waste water into groundwater or even deep underground are all common causes of concern [see also Why Alternative Energy Will Never Become Widespread (In Our Lifetime)].

The U.S. Environmental Protection Agency (EPA) estimates that 70 to 140 billion gallons of water are used to fracture 35,000 wells in the U.S. each year, while shale gas wells can use more than 4 million pounds of proppant per well. Disturbingly, some studies have shown that between 20% and 85% of fracking fluids may remain underground and contaminate groundwater.

Another major environmental concern has been increased microseismic events. The U.S. Geological Survey documented several cases of man-made earthquakes caused by hydraulic fracturing and waste disposal wells. While these have so far been small earthquakes, they may be powerful enough to disrupt underground wells and cause soil contamination.

Investing in Fracking

There are many different ways for investors to capitalize on the boom in fracking. The easiest way is to simply purchase stock in companies that hold stakes in major U.S. shale plays, including companies like Continental Resources (CLR), Rosetta Resources (ROSE) and Encana (ECA), which all have stakes in major fracking areas [see also Top 5 Global Oil Stocks By Market Cap].

Investors looking for easy diversification can also consider the Market Vectors Unconventional Oil and Gas ETF (FRAK), which contains more than 40 different stocks from the United States, Canada and Australia. These companies receive at least half of their revenue from unconventional energy or hold a stake in properties that offer the same potential.

Of course, investing in fracking is a double-edged sword. Higher production levels may produce more revenues, but they could also put downward pressure on natural gas prices as supply increases. However, the industry hopes to make up for some of this excess demand by exporting natural gas, which could result in renewed demand from overseas buyers.

Finally, some investors may also want to consider investing in auxiliary industries that supply the fracking industry. For example, companies like Heckmann Corporation (HEK) provide water services to some of the country’s most prolific shale plays, while Canada’s Poseidon Concepts (POOSF) leases modular tank systems to the oil and gas industry.

The Bottom Line

Fracking has given the U.S. an enormous potential source of domestic energy, but that cheap energy comes with environmental and health costs. While fracking hasn’t become as popular abroad, the technology appears to be on the rise in many countries, even despite the previously mentioned temporary ban in Britain.

Investors looking to capitalize on the growing industry have many different options, ranging from an industry ETF to auxiliary industry suppliers. Investors should keep in mind that greater natural gas supplies could reduce the market price and potentially hurt companies operating in the space, while there’s also ongoing regulatory risk [see also 25 Ways To Invest In Natural Gas].

The Definitive Guide to Fracking

Legacy Oil + Gas Inc. Strong Bakken Shale Operational Upgrade BUY

English: Manitoba Highway 5 route marker, with...

English: Manitoba Highway 5 route marker, with buffalo removed (Photo credit: Wikipedia)

Oct . 31

Legacy Oil + Gas Inc.
LEG : TSX : C$6.85  BUY Target: C$11.25


Legacy is a uniquely positioned, well-capitalized junior oil and natural gas company with a proven management team committed to aggressive, cost-effective growth of light oil reserves and production in the WCSB.


Legacy provided an operational update characterized by incremental improvement in a number of core areas with respect to drilling time and drill costs, type-curve performance and initial production rates. A particular highlight included five Q3/12 Mississippian wells in the Alameda/Steelman area (targeting the Frobisher and Midale formations) that averaged IP30 rates of 440 BOE/d per well.

Well performance in the Bakken and Spearfish (both in Manitoba and North Dakota) continues to outperform management (and third-party engineer Sproule’s) type curves . 

In total, the company drilled a robust Q3/12 program with 46 gross (36.2 net) wells and 100% success. 


Positive  While the tone of the release alludes to a potential beat

on the forthcoming Q3/12 results (to be released November 8, 2012), we

await the actuals prior to altering our estimates. We have made some

tweaks to our risked upside scenarios in the Spearfish (primarily related

to the inclusion of long, rather than short wells in our long-term

Manitoba assumptions, and reduced average well costs), though this has

not impacted our target price.


We are reiterating our BUY recommendation on Legacy, with an unchanged C$11.25 target price. Our target remains based on a 6.0x 2013 EV/DACF multiple supplemented by $3.05 of risked Bakken and Spearfish upside. Legacy currently trades at a 5.3x 2013 EV/DACF multiple and $82,127 per forecast BOE/d.

Denbury Resources Sells Out Bakken Assets To Exxon

XTO Energy

XTO Energy (Photo credit: Wikipedia)


Denbury Resources (DNR : NYSE : US$17.30)


Denbury announced it is selling its Bakken assets  to ExxonMobil (XOM) and subsidiary XTO Energy for $ 1.6 B cash

subject to closing adjustments, and ExxonMobil’s operating interests in Webster Field in Texas and Hartzog Draw Field in Wyoming, both of which are ideal candidates for carbon dioxide flooding and close to Denbury’s existing or planned CO(2) pipelines. In addition, Denbury has agreed in principle to either purchase an interest in the CO(2) reserves in ExxonMobil’s LaBarge Field in southwestern Wyoming or purchase incremental CO(2) from that field, on terms and conditions to be mutually agreed upon by the parties.

The purchase of an interest in CO(2) reserves would reduce the amount of cash received by Denbury. Denbury intends to use the cash proceeds from the transaction to pursue the purchase of additional oil fields in the Gulf Coast or Rocky Mountain regions that are suited for CO(2) flooding, to fund capital expenditures, and/or to repay outstanding debt under its bank credit facility.

Additionally, Denbury plans to resume its stock repurchase program begun in October 2011 under which $195 million of the $500 million of authorized repurchases have been made. Assuming no additional assets are acquired with the cash proceeds in a manner that would qualify for like-kind exchange treatment for federal income tax purposes, Denbury estimates that its after-tax cash proceeds from the transaction will be approximately $1.1 billion.



DeeThree Exploration – Bakken Play Continues To Surge

English: Toronto Stock Exchange, Wellington St...

DeeThree Exploration  (DTX : TSX : $5.73)


Shares of DeeThree Exploration continued to power to all-time highs as investors reward the company for their continued development success and robust reserve report released in late August 2012.

Keith Schaefer, editor of the Oil and Gas Investment Bulletin, has been very bullish on the name over the last year and still thinks there is more to come. In his last note, Schaefer commented that the company is currently being valued at approximately $75,000 per flowing barrel (pfb) and he believes that it could increase to $110,000 pfb as a result of continued success at the company’s Belly River and Alberta Bakken plays.

 The company currently produces 5,000 barrels per day (bopd), with management guiding 2013 exit production at 9,000. He also commented that shallow (low-cost) production with high flow rates compared to other Canadian plays make DeeThree special.

Finally,  “The beauty here is it’s still very early days for both these plays with lots and lots ofxrunning room left and hundreds of drill locations that will take a few years.” Now as long as the company grows only as fast as its balance sheet allows, then we could really be in business.




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