This is the Most Unique Oil Company in the Bakken

Exchange Trade Funds are one way to spread risk over a variety of equities, but when investing in an ETF you must pay a maintenance fee which lowers your return. What if there was an "ETF" that was also a company, which instead of charging you fees may one day pay a dividend.

Northern Oil & Gas (NYSEMKT: NOG  )  offers a unique way to play the Bakken because it takes minority stakes in various wells across North Dakota through numerous operators to spread out risk. From Continental Resources (NYSE: CLR  )  to Whiting Petroleum (NYSE: WLL  ) , Northern Oil & Gas has partnerships with dozens of quality E&P players.

Rundown
With an operating margin of 75.4% as of the latest quarter, Northern Oil & Gas tries to make the most of its 187,000 net acres. The great thing about the Bakken is most of the output is crude, which is why 90% of Northern Oil & Gas' production mix is oil.

Upside
Northern Oil & Gas was forecasting eight wells per "pad" when it saw roughly a thousand places left to drill on its acreage, but Continental Resources' innovative mentality may boost that. Through downspacing tests, Continental Resources was able to successfully bring 14 wells online on one pad. That is just the beginning, Continental Resources wants to try out further downspacing techniques to get at least 16 wells online per pad.

If more wells can be brought online in this way, then Northern Oil & Gas will be able to boost output, cash flow, reserves, and potential well locations all across its acreage. Additionally, other Bakken operators will likely follow in Continental Resources' footsteps and attempt to utilize downspacing to extract more crude from their acreage as well.

Continental Resources has been an industry leader in the Bakken, purchasing 300,000 acres in North Dakota back in 2003. This comes eight years after Continental Resources was the first to use horizontal drilling on the Cedar Hills Field in North Dakota and successfully develop the area.

Boosting reserves through expertise
Shareholders of Northern Oil & Gas should feel confident in Continental Resources' ability to keep innovating and drive future value through better drilling techniques and access to more recoverable crude. Downspacing allows each bench of the Three-Forks and Bakken to be tapped into, versus just the upper Bakken layers. Going forward, Continental Resources plans to tap into the Three-Forks through new wells, and other operators like Kodiak Oil & Gas are taking notice.

The Middle Bakken is 11,300 feet below the surface, and the Three-Forks benches are spread out 300 feet under that. In the beginning of the recent North Dakota oil rush, most operators only tapped into the Bakken bench because it was the most lucrative part of the play at the time. But now that oil producers can bring more wells online per pad, those Three-Fork benches are starting to look awfully attractive.

By increasing its reserves through operators like Continental Resources, Northern Oil & Gas reduces the need to purchase additional acreage. Proven reserves for 2012 were up 400% over 2010, and there is no reason to think that 2013 didn't realize another large jump.

When Northern Oil & Gas updates investors next month, look to see just how Northern Oil & Gas' partners have been able to rack up additional reserves. Past results will supplement future growth. Shareholders should also look to Northern's capital expenditure plans for 2014 and how it plans to develop those reserves.

Montana
Another asset Northern owns that isn't talked about often is the 40,500 acres owns in Montana. The Bakken/Three-Forks benches spread out beyond just North Dakota; Richland County in Montana is home to the Missouri Breaks oilfield.

An ETF tries to cover the entire industry, and Northern is no different. With 32,100 acres in Richland County and another 8,400 acres to tap into the Starbuck field just north of Richland County, Northern is also a way to play Montana shale development.

As a testament to the value of this acreage, Whiting Petroleum recently purchased $260 million worth of assets that taps into the Missouri Breaks oilfield. Whiting Petroleum is another partner of Northern Oil & Gas, and 2014 will see continued investment in Montana, boosting output on a large part of its acreage. 

Just as Continental Resources is improving downspacing in North Dakota, Whiting Petroleum is doing the same thing in Montana. Management has proposed an 11 well, high-destiny project in the Missouri Breaks, which, if successful, would further enhance both Whiting Petroleum's and Northern Oil & Gas' acreage value.

Foolish conclusion
By spreading out risk through multiple operators, Northern Oil & Gas is a way to play the entire Bakken/Three-Forks field without the all of the risks that come with individual companies. Downspacing efforts will further increase Northern's reserves, and efforts to develop Montana could provide significant upside for both Whiting Petroleum and Northern Oil & Gas.

If you want exposure to the Bakken/Three-Forks but don't know who to pick, let Northern Oil & Gas decide for you.

Burgeoning oil production in the U.S. isn't OPEC's only nightmare
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