High growth through lower levels of risk, that's the strategy of Northern Oil and Gas (NYSEMKT:NOG). Northern is a non-operating partner in wells drilled in the Three Forks and Bakken plays. This allows it to invest in high growth assets with less risk and allows it to sport a profile of diverse wells all across North Dakota (where 71% of Northern's acreage is). Using a strengths, weaknesses, opportunities, and threats analysis investors can determine whether or not this is a company worth investing in.

Northern owns a minority stake in wells run by numerous different operators in the Bakken/Three Forks plays, while enables it to sport a diverse portfolio across its 182,400 net acres waiting to be drilled.

Northern has a large backlog of wells waiting to be completed or in the process of being drilled, which was 218 gross wells (17.4 net) as of June 30. There is plenty of oil for those wells to extract, with 67.6 million barrels of oil equivalent in proven reserves as of 2012.

On the income side of things Northern has grown its EDITDA by 9,000% from 2008 to 2012, and in the first half of 2013 is up 24% year over year.  

Well completion costs have been steadily going down for one of Northern's biggest partners, Continental Resources, which operates 12.5% of Northern's wells. In 2012 the average price to complete a well was $9.2 million, and now it's $8.2 million 

Northern also has some weaknesses that investors have to be aware of. The number of wells completed in the last quarter missed estimates due to adverse weather conditions. Adverse weather conditions during the Spring are putting a dent in Northern's growth.

Like all E&P companies operating in shale plays, their wells have rapid depletion rates, which forces shale companies to keep having to drill more and more wells to keep growing.

Northern also has lower levels of production growth versus its peers, like Oasis and Continental. Oasis grew its oil production by 48% in its latest quarter and Continental grew its production in the Bakken region by 65%. If you are growing less than your peers during the boom times what is it going to be like during the bad times? It also points toward Northern not being as efficient as other players in the region.

Northern has the potential to see lower well completion costs in the future, which will push up margins and thus increase the bottom line. Two of its partners, Oasis Petroleum (NYSE:OAS) and Continental Resources (NYSE:CLR), are trying to lower well completion costs to below $8 million by the end of 2013 from $8.2 million currently. This will increase the bottom line for all three players and will enable wells to be profitable even if oil prices fall.

So far Northern has completed 15.3 net wells in the first half of 2013 and they plan on completing 36 net wells for the full year. This leaves 20.7 net wells to be completed which will push up production. Northern's backlog of 17.4 net wells coupled with better weather conditions should help it reach its goal for 36 net wells completed for 2013.

Pad drilling enables E&P players to drill more wells on the same amount of land, which pushes up the number of wells that can be drilled. Right now the whole industry is switching to pad drilling and Northern will be able to better utilize its acreage position. This, combined with having $400 million in an undrawn credit line ready to deploy, gives Northern a long growth runway. 

While Northern is able to limit its risk via owning a minority stake in a well, if that well is a bust it still loses out on all the money it sunk into the project.

High depletion rates combined with adverse weather conditions, which hamper drilling efforts, can cause growth to stall or slow significantly in any given quarter (such as the last one).

Northern is hedged, but it still needs oil prices to remain in the $80+ range to hold its margins as they are. If oil prices decline in the long term, average realized prices will fall and income growth will face a major headwind.

Continued bad weather will force Northern to put its ambitions on hold and it will take longer for production to meaningfully increase. 5% year-over-year growth is small relative to Northern's size and to most Bakken operators, and it is easy to slip into declining production if Northern is unable to keep completing wells. If a company like Northern sees declining production rates then the Bakken growth prospect becomes much weaker and the stock could get hammered.

Oasis and Continental
Oasis is planning on pushing production up between 4.4% and 13.4% next quarter by completing more wells and utilizing the majority of its capital expenditure budget. Oasis has only spent 42% of its $1 billion capex budget, so it's planning on a major push for growth in the second half of 2013 and in 2014. It also recently purchased 161,000 acres in the Bakken for $1.5 billion . Oasis is worth owning at as it prepares for a large increase in production.

Continental has a backlog of 75 wells to be completed but isn't planning on ramping up well completions until next year. It is, however, going to complete about 100 wells by the end of the year to bring total wells completed to 245. Continental is ahead of schedule to reduce well completion costs below $8 million and is worth taking a look at because it is growing its total production rate at 42% (ahead of its own guidance) while reducing costs. 

While I think there are better E&P players out there, Northern's business model is intriguing. If Northern can start growing its oil production and getting wells completed on time then it could be a stock to own. But I would hold off until its next earnings release to see if it can start finishing wells.