Small cap companies may grow up one day and become larger companies, earning huge returns for investors who have the fortitude and skills to play in this end of the market. Here's a look at three small capitalization players active in the Bakken play in the Williston Basin, all of which have ambitious plans to develop this play in 2012. (To know more about oil and gas, read Oil And Gas Industry Primer.)
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Small Cap Players
Kodiak Oil and Gas (NYSE:KOG) is one of the fastest growing operators active in the Bakken and expects to exit 2011 with average daily production of 10,500 barrels of oil equivalent (BOE) per day. The company recently acquired additional properties here, and through some aggressive development estimates, that production will triple and reach 30,000 BOE per day by the end of 2012.
Kodiak Oil and Gas will spend $585 million in capital in 2012 to help accomplish this production goal and add three operated rigs during the year, bringing its total to eight by the end of 2012.
Triangle Petroleum Corporation (NYSE_AMEX:TPLM) has 81,000 net acres in the Williston Basin with the properties spread across Montana and North Dakota. The company is currently involved in the Bakken mostly on a non-operated basis, and has participated with larger independent oil and gas companies including Newfield Exploration (NYSE:NFX), EOG Resources (NYSE:EOG) and Hess Corporation (NYSE:HES).
In 2012, Triangle Petroleum plans to transition to a partially operated business model here and is targeting a development mix that is 70% operated and 30% non-operated. Triangle Petroleum has spud the company's first two operated wells and has permits approved or pending for fifteen additional operated wells. Triangle Petroleum has set a $131 million capital budget for fiscal 2013 (ends 1/31/2013) and will spend more than half this capital on the company's operated program.
Oasis Petroleum (NYSE:OAS) has more than 300,000 net acres of exposure to the Bakken and has spent $399 million in exploration and production capital during the first nine months of 2011.
Oasis Petroleum hasn't disclosed its 2012 capital budget yet, but with an estimated 1,170 drilling locations into the Bakken, investors should expect this operator to continue to focus capital on this popular oil play.
Northern Oil and Gas (NYSE:NOG) is continuing to lease up acreage prospective for the Bakken and boosted its position to 160,000 net acres as of December 2011. Northern Oil and Gas estimates that the company's well costs will increase in 2012, as it plans to participate in wells that are drilled and completed with longer laterals and additional hydraulic fracturing stages. The company estimates that the average well in 2012 will cost approximately $7.4 million to drill and complete.
Northern Oil and Gas also operates a non-operated business model and recently reported participating in wells with ConocoPhillips (NYSE:COP), Continental Resources (NYSE:CLR) and Marathon Oil (NYSE:MRO).
The Bottom Line
Investors can make huge returns through the correct selection of small capitalization stocks, and one of these four operators just might be the home-run investment needed by us all. One thing to remember is that along with the potential for higher return comes higher risk. (For additional reading, check out A Guide To Investing In Oil Markets.)
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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.