3 Reasons to Buy Oasis Petroleum in 2014

Reasons No. 1: The smart money is moving in.

Feb 16, 2014 at 11:41AM

Darn, I missed it!

I think that's how a lot of energy investors feel about the Bakken stocks like Oasis Petroleum (NYSE:OAS). New applications of hydraulic fracturing and horizontal drilling have unlocked vast quantities of hydrocarbons, and this has richly rewarded investors who got in on the ground floor. 

But the North Dakota oil boom is far from over. In fact, we may still be in the early innings of this development, and plenty of catalysts could send Oasis shares higher in 2014. Here are three reasons to add it to your portfolio. 

1) The smart money is moving in
In high school, you got in trouble for looking at the tests of the smartest students in the class. But in investing, peeking over the shoulder of the world's smartest investors is usually a good idea. 

And lots of smart money is moving into Oasis. According to recent SEC filings, billionaire Ken Griffin of Citadel Investments increased his stake in the company last quarter by 35% to $141 million. 

Billionaire John Paulson, famous for predicting the U.S. sub-prime mortgage meltdown, is also bullish on Oasis' prospects. Last quarter SEC filings indicated that his hedge fund Paulson & Co. initiated a new position in Oasis worth $39 million. Other legendary hedge fund managers like Paul Tudor Jones, Jim Simons, and Steven Cohen also own sizable stakes in the company. 

2) The company is posting great financial results
Oasis is posting some incredible numbers. According to the company's preliminary financial results for 2013, Oasis grew its average daily production 51% year over year to 33,904 barrels of oil equivalent per day, up from 22,469 Boepd in 2012. The firm also increased total estimated net proved oil and natural gas reserves to 227.9 million barrels of oil equivalent, up 59% year over year.  

And while those figures are impressive, more of that top-line revenue is starting to trickle down to the bottom line. In the past year Oasis has reduced its average well completion costs by 12% to $7.9 million per well. Thanks to the transition to pad drilling, hydraulic fracturing, and other operational efficiencies, management expects to shave another $400,000 off that figure by the end of 2014. 

And all of this translates into big cost savings for Oasis. When you multiply that $400,000 figure across the 106 net wells the company expects to drill this year, Oasis will pocket an additional $42.4 million in 2014. It's still a long way from closing the firm's funding gap, but savings will have a big impact on the firm's free cash flow. 

3) The company has plenty of emerging catalysts in 2014
Yet the Bakken might just be the beginning for Oasis. According to the latest United States Geological Survey, the Three Forks could contain an estimated 3.7 billion barrels of undiscovered, technically recoverable crude oil -- slightly larger than the Bakken that lies above it. 

Drilling results coming out of the lower Three Forks have been positive. Continental Resources (NYSE:CLR) has been delineating its Three Forks acreage. Pilot wells in the play's second and third benches have averaged initial production rates between 1,200 and 910 boepd respectively. 

This summer Kodiak Oil and Gas (NYSE:KOG) also completed six pilot wells with 30-day initial production rates between 1,200 and 3,500 boepd. And although these figures definitely suggest that the Three Forks is viable, management has warned more testing is needed. 

As Oasis and rivals de-risk their Three Forks position, it will be a big boost to the company's reserves in 2014 and a new source of production growth for 2015 and beyond. That could be a covert catalyst for the stock. 

Foolish bottom line
Investors who have watched the Bakken boom from the sidelines shouldn't worry. The recent sell-off in light oil producers has created some bargains, and Oasis Petroleum, in particular, has plenty of catalysts that could drive its share price higher in 2014.

Not too late to get in on the American Energy Revolution
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Robert Baillieul has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information