EOG's Mark Papa - Oil Companies Are Undervalued

If you are a stockholder in oil and gas companies, you are hoping everything lands where Mark Papa sees it. He believes unconventional gas and oil companies have been undervalued long enough. EOG has reported recoverable reserves up to 900 mmboe in the Eagle Ford Shale, but Papa mentions that the company estimates there is as much as 21 Billion barrels of oil in place across EOG's acreage. The 900 mmboe equates to a recovery factor of less than 5%. Grow the recovery to 10, 15, 0r 20% and it could mean billions of dollars for stockholders.

...Papa is pretty well known as a straight shooter in the oil and gas industry so when he says something it is worth listening to. This comment caught my attention:

"The true impact of unconventional drilling in unconventional rock formations is the most underreported event in the mainstream press today"

As did this one:

"It's a new paradigm. Unconventional drilling has dramatically changed the U.S. natural gas and crude oil picture in the U.S. and is probably the biggest change in the last 40 years in the industry. Everybody in the world is chasing these shale plays."

And I think this unconventional revolution makes for in interesting opportunity.

This is a technological step change that has made millions of acres of land extremely valuable. The oil and gas industry obviously knows this, you can tell by the way the industry is snapping up the land and shifting capital in that direction.

The stock market however, seems a little slow on the uptake.

From what I can tell there are dozens of smaller oil and gas companies that hold large acreage positions in these emerging unconventional plays. And the stock market is valuing that land as being virtually worthless...

Read the full news release at seekingalpha.com

Small Eagle Ford Companies May Prove Good Investments

Companies with Eagle Ford exposure may prove to be good investments as the overall economy recovers. The economics of the play look promising, which in turn means companies will benefit from a better worldwide economy or in industry terms "better oil and gas demand". A few companies with Bakken and Eagle Ford assets are detailed below.

The world economy has come under pressure recently. The market has fallen as a result. Many of the small, high Beta, Bakken / Eagle Ford E & P oil companies have been hit hard. If the economy continues to go south, they could be hit some more. However, if they are, they will likely bounce back quickly as soon as the overall market begins to bounce. Small companies with good holdings in these prolific fields seem likely to be highly successful. How the EU credit crisis will resolve itself is anyone’s guess. It seems unlikely that everything will be allowed to fail. The European Commission President Jose Barroso is supposed to present options on Euro bonds soon. Perhaps that will help. The US equities markets have already taken into account a lot of the possible trouble. Yes, the situation could worsen to beyond even that, but it might also slowly resolve itself without a huge negative impact on the U.S. If you are a long-term investor, you can still make reasonable investments now. In fact you may make great ones.

Some of the stocks that have been unfairly beaten down during this time of crisis are the relatively young oil E & P companies. Their financial health is easily called into question in trying times. However, a number of the companies developing the prolific Bakken and Eagle Ford shale fields are almost certainly going to be successful. In the Bakken, 99% of the wells drilled find oil, and 90% are commercially viable. With good seismic and these odds, even small companies are going to eventually be highly successful. A few of the best looking candidates are Northern Oil and Gas Inc. (NOG), Goodrich Petroleum Corp. (GDP), Triangle Petroleum Corp. (TPLM), and Magnum Hunter Resources Corp. (MHR).

Read the full news release at seekingalpha.com

Bakken and Eagle Ford Lease Holders Good Investments?

Eagle Ford acreage is peaking the interest of oil & gas operators. First, Marathon spent over $20,000 per acre and then BHP acquire Petrohawk. The article below details a few reasons why it might be the right time to invest in Eagle Ford Shale operators and the companies who are active in South Texas. The liquids-rich and oil plays of the Eagle Ford and Bakken Shale have become the hottest real estate in the US.

"This (BHP-Petrohawk) buyout makes oil leases in these areas more expensive. It means demand for these leases is going up. It means many big leaseholders in the most desirable plays, the Bakken and the Eagle Ford, will likely see their share prices rise. This will be partially due to the short term increase in the value of their leases, but it is also due to the long term expected BONANZA nature of their holdings.


There is little doubt this will boost the companies small enough to be buyout targets. However, logic says the constant expectation of further buyouts (and the actuality of some) will even boost the big caps by extension, especially those who have large lease holdings in the Bakken and the Eagle Ford.

Given the approximate 50% premium to the stock price that BHP just paid for HK, it likely means the small companies are going to command big premiums. With this deal and the recent Marathon (MRO) deal for Eagle Ford acres, the going price for Eagle Ford leases seems to be about $20,000 per acre. This is a huge premium to the price those acres commanded just a few years ago."

Read the full news release at SeekingAlpha.com