3 Under-the-Radar E&Ps

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U.S. domestic oil and gas production is higher than it's been in decades, but giant companies like ExxonMobil and Chevron aren't doing all the work. Across the country, hundreds of smaller exploration and production outfits are contributing as well. These small companies may be potential buyout targets destined for incredible growth, or about to go bust, and they are worth doing a little research on. With that in mind, today we begin to get to know three independent E&Ps.

Bonanza Creek Energy (NYSE: BCEI  )
Bonanza Creek has only existed since 2006, going public this past December. Fortunately for a young company in our current commodity market, liquids and oil constitute 74% of its assets. It has operations in three regions: Colorado, California, and Arkansas. Proved reserves are about 43.7 million barrels of oil equivalent, up over 10 million boe compared to 2010.

Bonanza Creek is growing fast. Production in the month of November was up 78% year over year to 6,105 boe per day. The company's production goal for 2012 is 8,700 to 10,000 boe per day. As an aside, despite Bonanza's focus on oil and liquids, the company has one of the more attractive hedging prices for natural gas production I've seen -- $6.75 through the rest of this year.

Abraxas Petroleum (Nasdaq: AXAS  )
Abraxas has assets in the Bakken, the Niobrara, the Permian Basin, and the Eagle Ford, but make no mistake, this is a small operation. The company's capital spending program for 2012 is $70 million, and that's a 17% increase over last year. Abraxas plans to drill 25 gross wells in 2012, 20 of them in the Bakken, where the company holds 20,835 net acres.

Debt is high, however. For the third quarter of 2011, Abraxas' debt-to-equity ratio was over 154%. It will be interesting to see if that percentage comes down when the company reports its full-year results on March 15, or if management has any update on possible divestiture opportunities for its Texas assets.

Triangle Petroleum (AMEX: TPLM  )
Triangle Petroleum's main assets are in the Bakken, spread across North Dakota and Montana. It also has legacy assets of 410,000 net acres on Prince Edward Island in Canada that are not considered core to its portfolio.

The acreage in Montana is largely untested, and Triangle is taking the wait-and-see approach, as other E&Ps move in and de-risk the area. As a result, the 29,000 net acres in North Dakota will receive all of Triangle's focus in 2012. The company plans to drill 12 to 15 gross wells this year, completing them around June.

Triangle has a delightful balance sheet, with about $94 million in cash and zero debt. You read that right: There is such a thing as an E&P with no debt!

Foolish takeaway
All three of these stocks are liquids-focused, but that is where the similarities end. Utilizing Internet tools like My Watchlist can help you stay informed and find the right fit for your portfolio.

Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. If you have the energy, check out what she's keeping an eye on by following her on Twitter, where she goes by @TMFDuffy.

Motley Fool newsletter services have recommended buying shares of Chevron and ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (6) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 05, 2012, at 4:35 PM, tjadams wrote:

    Actually Abraxas Petroleum's debt is in line with many other small cap E&P companies it's size. They also continue to have profitable quarters.

    The real game changer was the last presentation in January where management stated they are selling off their Eagleford acreage in April which will cause them to be debt free.

    They also purchased their own drilling rig to drill in the best Bakken property in McKenzie County. The rig arrived last week. Buy now because in a few months the stock will go much higher than it's target price of $7.

  • Report this Comment On March 05, 2012, at 5:54 PM, XMFAimeeD wrote:

    I agree wholeheartedly about the equipment- I like AXAS' stance on owning its own rig and employing its own crew.

    Am content to wait and see about the divestitures - presentation I read in Feb said "potential" to divest some Eagle Ford, Permian, and/or Canadian Bakken.

    Stock is cheap though, could be a fun bet.

    Fool on,


  • Report this Comment On March 05, 2012, at 6:29 PM, tjadams wrote:

    Presentation that I listened to in February said, "they would be selling the Eagleford in April." All that said the price target is $7 without any divestiture.

    And profitable. $.04 last quarter.

  • Report this Comment On March 06, 2012, at 3:48 PM, Teacherman1 wrote:

    In case you missed it, here is a link to a Business Wire article on Yahoo Financial concerning a news release by AXAS.

    Worth a read.

  • Report this Comment On March 06, 2012, at 5:05 PM, tjadams wrote:

    Reserve replacement up to 521% YOY as compared to 379%

    Production remained the same (in large part to AXAS taking natural gas production off line due to the current price environment - about 4,000 boepd)

    Total proven reserves up to 29.0 YOY as compared to 26.6

    Now the drilling rig they purchased will be drilling in the Bakken; specifically in McKenzie County - where some of the best wells have been drilled so far.

    Management stated they will be selling the Eagleford properties by the end of April/beginning of May which will make them debt free.

    Loaded up today with more shares.

  • Report this Comment On March 13, 2012, at 5:41 AM, clbjblk wrote:

    Go north of the border, find the players feeding the alliance pipeline,ND@ Mont are good but the transportation just can not handle all the hits after the roads dry up and the train tankers going to AUX SABLE and south already have been spoken for they got oil but the storage and transportation are way behind the little jv will get black gold but unless they have a trainin there back pocket they are going to have to wait till Warren Buffet beefs up his rail which he is doing but he is a long timer FCGYF has connections with Sable in Chicago and Alliance and they even have there own tie ins SSN TPLM AXAS KOG are all good plays but there is not enough tankers so they will get less for what they pull out unless Iran shoots off a cap that processing plant in Minn has those little guys just like the rail road had the wheat farmers on little house on the prairie. Look at Horn River Basin if you want a little guy ARSLF the president of that company and T B Pickens go way back look at the volume and who surrounds his land and China and ECA are already beating on his door and it is only a nickle and PBKEF just set up shop up there and everything they touch right now turns to green they are not worried about the fracers like the states they have there own patents and a monthly dividend they still got another $10.00 left in them before the end of the year unless Mitsu buys them and they already had lunch, just a thought, GSFVF is going to Texas and thy have the best frac system next to Pbkef and the guy they are going to work for in TX. has his little 80 mile tie in pipeline but they are privately held and GSFVF has 300 wells to do just for him alone and that company,s check does not bounce and a lot closer to Houston unless you got your Wal MART camping ND permit I would cross the line for Canadian rail or go south till they Obama,s in laws out of the White House even if they said build Keystone it would still take a long long time to move that product and thats if China does not talk Canada into sending it west and we get to borrow money from them those jv stocks would have already been rockin but Obama,s treehuggers fixed that it is a shame and he is not done yet.He even got his union buddies mad,God Bless America I think we can still say that but I always will.

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