Billionaire John Paulson Likes This North Dakota Oil Stock

The billionaire hedge fund manager has been accumulating a position in this Bakken producer.

Mar 1, 2014 at 1:45PM

When John Paulson loads up on shares of a company, smart investors should take note. In 2006, the billionaire hedge fund manager predicted the collapse of the U.S. subprime lending market. And in 2010, he set another hedge fund record by making nearly $5 billion in a single year. 

It never hurts to peek over the shoulders of the world's greatest investors. So what is Paulson buying now? According to the latest 13-F filings from the SEC, his hedge fund Paulson & Co. has acquired a 10 million-share position in Whiting Petroleum (NYSE:WLL). This brings Paulson's total stake in the company to slightly more than $640 million.

Why is Paulson so bullish on Whiting?
Two factors may have attracted his attention. First, the company has posted some truly incredible results out of the North Dakota Bakken. Over the past three years, Whiting has grown its production more than 44% to 92,800 barrels of oil equivalent per day. And during the same time frame, the company has increased its earnings per share 32%.

But this might just be the beginning. According to recent estimates from the United States Geological Survey, the Lower Three Forks could contain some 3.7 billion barrels of undiscovered, technically recoverable crude oil -- slightly larger than the Bakken field that sits above it.

As part of this effort, Whiting drilled all the way through the lowest parts of the Three Forks to determine the prospects of the lower benches. As the company delineates and de-risks these lower benches, it could be a hidden catalyst for the stock.  

Second, Whiting may be sitting on America's next big shale play. The company owns about 64,240 net acres the Colorado Niobrara. And while the field has been known to geologists for almost a century, it has only been through the application of new technologies like horizontal drilling and hydraulic fracturing that the energy industry has been able to unlock the Niobrara's bounty. 

If there's one thing we know about Niobrara it's that it's oil rich. Per drilling-spacing unit the play has almost 60 million barrels of oil in place -- about twice that of the Bakken. And according to numbers provided by the Colorado Oil and Gas Conservation, the play could hold an estimated 3.6 billion barrels of recoverable oil equivalent.

Drilling economics also compare favorably to the Bakken. According to figures provided by Whiting, the average well in the Niobrara costs in the neighborhood of $7 million to $8 million to complete, and CEO James Volker claims that the company is generating a 400% return on every well it drills in the region.

And Whiting isn't the only company to see the Niobrara's potential. Over the past few years, other smart money operators have quietly accumulated vast amounts of land in this little-known shale play.

Noble Energy (NYSE:NBL) CEO Charles Davidson describes the Niobrara as a "top-tier oil play," and his company plans to invest $1.7 billion in the formation in 2014. Results have been so good that management has accelerated its development program, aiming to triple production within five years.

Energy giant Anadarko Petroleum (NYSE:APC), which owns about 350,000 acres in the region with as much as 1.5 billion barrels of recoverable reserves, is also betting big on the play. The company has budgeted $1.5 billion to develop its acreage with plans to drill 150 wells this year. Even for a big company like Anadarko, those are substantial figures.

Foolish bottom line
Whiting has spent billions to build out its position as a premier player in the Bakken and Niobrara. By sitting on two prime shale plays, there're many things that can go right for this company. Combined with an endorsement from John Paulson, this stock could be a breakout performer in 2014.

Get in before the crowd
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980's, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in late 1990's, when they were nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play", and then watch as it grows in EXPLOSIVE lock-step with it's industry. Our expert team of equity analysts has identified 1 stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


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.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.