We are in the midst of an energy revolution like we never dreamed possible. Trapped beneath our great country are vast oil and gas resources that we're still learning how to access. Our oil and gas production is expected to grow rapidly over the coming decade; as it does, three tiny energy companies have the potential for very big futures.
Just the Bakken, please
Weighing in at an enterprise value just shy of $4 billion, Kodiak Oil & Gas (UNKNOWN:KOG.DL) is the largest company on this list but a real runt when compared to more well-known energy companies. The company is almost solely focused on oil and gas production in the Bakken, which has helped it to grow its production at an unbelievable rate. In fact, from 2011 to 2012 it grew production by a staggering 270% and it's projected to double production again this year. To get there, the company is planning to spend nearly $750 million to drill 75 new wells.
With an inventory of more than 950 future wells, Kodiak still has a huge growth runway ahead. This is especially true when you consider the company currently has just 125 wells. With its shares up more than 300% over the past five years, its returns over the next five could be even better. If you want to invest in the growth of the Bakken, Kodiak is certainly worth a deeper look.
I'll take the Marcellus, with a side of Utica
If you thought Kodiak was small, tiny Rex Energy (NASDAQ:REXX) weighs in at an enterprise value of just over a billion dollars. Don't let its small size fool you: This energy underdog could grow up to be a top dog someday. Its operations are mainly focused on the Marcellus Shale, with emerging growth coming from the Utica Shale. Since 2009 the company has grown its production by a compound annual rate of 50%.
Rex is planning to spend about $250 million to grow production over the next year and expects to see those funds to yield a 30%-40% boost in production. The big story here is that the growth will be in the all-important liquids department -- overall liquids growth will come in at 70%, with oil and condensate growth coming in at 55% of that. If you want to stake your claim to the potential growth in the Marcellus and Utica, then Rex Energy is a name you want to get to know.
I want it all, and I want the Eagle Ford too!
The final name on my list is Magnum Hunter Resources (NASDAQOTH:MHRCQ). With an enterprise value of around $1.5 billion, it's around the same size as Rex, however, there's a much bigger story at Magnum Hunter. What's intriguing here is the company has acreage in the Bakken like Kodiak, and has its own Marcellus and Utica Shale positions like Rex, but it really goes over the top with further diversification into the Eagle Ford Shale. The Eagle Ford is a big deal as you can see below:
These strategic positions have led to some explosive growth over the past year with production nearly tripling. Even more impressive is that the company's production is increasingly focused on liquids, which will be more than half of its production in the year ahead. That's why if you want to invest in the future of the three hottest energy plays, Magnum Hunter is the one to put at the top of your watchlist.
My Foolish take
With great reward comes great risk, and these three companies offer a boatload of both. I like the fact that Magnum Hunter is not reliant on any one play; it is important for its future success. However, its balance sheet is less than ideal. That's why I'm personally more interested in the size and balance sheet strength found at Kodiak Oil & Gas.
Fool contributor Matt DiLallo 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.