Thanks to a Glaring Market Inefficiency,
One Junior Oil Stock Offers Potentially
Historic Upside Potential…
Revealed: This “Absurdly” Mis-priced Stock
Could Be Our Next 10-Bagger
It’s the most absurdly mis-priced stock I’ve encountered in my two decades of operating in the capital markets.
Thanks to a perfect storm of market inefficiency, one company has now emerged as my next “pound-the-table” junior oil stock.
It sounds astonishing, but this company – which I’ll tell you all about in just a moment – is actually growing at a rate of nearly 100%-plus per year…and trading at 2 times leading cash flow.
When you see how all the pieces fit together with this company – including its remarkable location – you’ll understand why I’m so excited about its upside potential over the next 12 months.
Those of you who are familiar with my work know that I don’t often yell and scream about any individual stock.
The fact is, I’ve “pounded the table” about specific exploration stocks just three times before for my Oil & Gas Investments Bulletin subscribers.
The first time I did this, my readers saw a seven-bagger in just seven months.
The second time resulted in a six-bagger in less than one year.
And the third time we saw another 7-bagger in just 12 months.
Now, I have to tell you…the upside potential for the stock I’m writing about today is even greater than those three blockbusters I just mentioned.
Thanks to six critical factors that have converged – all in the favor of this mis-priced company – you now have the chance to take advantage of an all-time missed valuation.
I’ve prepared a full report on this fast-moving profit scenario – including everything you need to invest right away. In fact, I’ll tell you how everything you need to know – starting right now…
A Truly Absurd Valuation:
Almost 100% Annualized Growth
& Trading At 2 times Leading Cash Flow
Listen…figuring out what an asset is really worth isn’t all that complicated.
Whether you are talking about the valuation of a house or the valuation of a publicly traded oil producer – it’s mostly just simple math.
You can figure out roughly what your house is worth based on what similar houses around you are selling for.
Those surrounding house prices are driven by the average family income in your city, interest rates and rental values.
Valuing publicly traded oil producers is really no different.
It is not terribly complicated – oil producer stock prices are driven by cash flows, quality of assets, balance sheets and growth rates.
Companies with similar growth rates, similar assets and similar balance sheets will have similar valuations.
Let me show you.
I spend a lot of money getting full access to analyst coverage of publicly traded securities.
The larger companies are followed, analyzed and valued by dozens of analysts.
Each of those analysts present a table like the one that you see below.
This particular table compares a group of Permian Basin focused oil producers.
The table presents the valuation of Permian Basin focused operators relative to their EBITDA numbers.
EBITDA is essentially the cash flow that a business is generating before outlays interest on debt, taxes and capital spending.
The closer to the top of the chart the company appears the richer its valuation.
The further to the right the company appears the faster it is growing.
You can see from the table that the faster growing companies trade for higher valuations….7 to 9 times EBITDA.
The slower growing companies trade for 4 to 6 times EBITDA.
That makes sense to me. Faster growing companies should have richer valuations…higher multiples of EBITDA.
I’m sure it makes sense to you as well.
It should because it isn’t very complicated.
The companies in the chart above are within the view of the analyst community.
Analysts cover them because the institutional investors that manage hundreds of billions of dollars are interested in them.
Because analysts cover these stocks, and because the institutions study them, the stocks are consistently valued.
They are efficiently valued.
The fast growing companies (30-40% EBITDA growth) trade for 7-9 times EBITDA.
The slower growing companies (0-20&% EBITDA growth) trade for 4-6 times EBITDA.
There is very little deviation from this.
The market is very EFFICIENT for these stocks that are covered by analysts and owned by institutions.
An efficient market is not a friend to investors like you and me.
When the market is efficient it is very hard to find bargain priced stocks.
I’ve just shown you some hard numbers from one of the analyst reports to which I have access.
I’ve shown you that that oil producers growing EBITDA by 30-40% are consistently valued at 7 – 9 times EBITDA.
Pause for a second and keep that in mind….
Now here is where you need to sit up and pay attention.
Because I’m about to show you something very different…something that is not very efficiently priced.
Given that you know that these 30-40% growers are valued at 7-9 times EBITDA or cash flow……
What would you say if I told you that I found an oil producer that is growing by more than almost 100 percent annually and is valued at just 2 times leading cash flow?
That valuation multiple is just a mere fraction of the valuation multiple that the market has assigned companies that are growing at a much slower pace.
And…this company had all of its acreage right in the heart of an incredible oil play where breakeven prices are just $26 per barrel?
It’s the best oil economics in North America.
Package together the elements that I have just laid out to you.
Companies that are growing at one-third the rate of this company are valued at up to 5 times higher.
With the rate this company is growing it shouldn’t be valued at a massive discount to these other companies…
It should be valued at a premium—a HUGE premium.
Not only are they growing fast—they’re insanely profitable! This company is producing oil for just $26 per barrel.
But the question is…how is this absurd valuation possible for a company that is:
ü Annually growing cash flow in the triple digits…
ü Has $26 dollar per barrel breakeven pricing…
ü And trades at an absurd 2 times leading cash flow!
How in The World Did I Find
A Company So Inefficiently Priced?
The stock market is generally quite efficient.
You have educated professional investors buying stocks from educated professional sellers.
Everyone knows what they are getting into.
As a result, pretty much everything that is known about a company gets priced into the stock price.
This efficient pricing is why mutual fund managers have such a hard time beating the stock market index.
And because professional managers deal with large amounts of money they aren’t able look at small companies that are far more likely to be inefficiently priced.
Successfully investing $10 million into a small cap company isn’t going to move the needle for a fund manager who oversees a multi-billion-dollar portfolio.
It would be a waste of time – for them…but not for us.
I’ve already told you that the oil producer that I have found is growing at an annualized rate of more than almost 100 percent.
This company should be trading at a huge multiple of cash flow.
It isn’t.
It is trading at 2 times leading cash flow.
This company isn’t appropriately priced.
It is absurdly priced.
Why? How is this possible?
The answer lies in the fact that this company hasn’t been trading in an efficient market.
It hasn’t been trading in a market with professional educated buyers trading stocks with professional educated sellers.
Instead this company has been trading in a market that has had a complete absence of buyers.
And some very motivated sellers.
This vacuum of buyers combined with motivated sellers has created a unique situation: a completely inefficient market.
I can honestly say that in my two decades of operating in the capital markets I don’t think that I have ever seen a company fall through the cracks like this.
I know for a fact that I’ve never seen such a high growth company trade at such a low valuation.
How Everything Came Together to Create This Absurdly Low Valuation
I want to explain how it is possible that the market for this company became so inefficient…
I understand how hard it is to actually believe that a company can really be this mis-priced.
So how did it happen?
The answer is that there is no single factor that caused this.
There were several factors all of which acted together to create A Great Big Fat Pitch for investors.
A company that is growing at an annualized rate of over almost 100 percent, with incredibly low breakeven production costs and trading for just 2 times leading cash flow.
In total I count SIX separate factors that have created this incredible bargain.
This is certainly a once-in-a-decade kind of investment opportunity.
Everything that could happen to misprice this company…….has happened to misprice this company.
Let’s go through those six factors so you can understand how this company became so incredibly cheap.
KEITH…I TRUST YOU…I DON’T NEED TO READ ANYMORE…SEND ME NAME AND SYMBOL OF THIS STOCK NOW!
Factor Number One – A Bombed-Out Oil Sector
This one is pretty obvious.
When the price of oil crashed the entire oil sector became despised by investors.
Retail investors who were burned by the crash haven’t come back.
Institutional funds that were focused on energy experienced massive withdrawals and were forced to close their doors.
Hundreds of billions of dollars that used to chase stocks in this sector have disappeared.
That has removed a huge amount of buying demand for these stocks.
The chart below tells the entire story.
This chart depicts the performance of the S&P Oil and Gas ETF (XOP).
Not only did this ETF crash in 2014…
…It crashed and still hasn’t rebounded in any significant way.
The XOP is still trading for only half of where it was in 2014.
There has been a complete absence of buyers for oil and gas producers.
You can see that in the chart above which has hardly moved despite oil prices now having tripled from the bottom.
What you need to understand though is….
That this chart represents the largest oil and gas companies in the business.
These are the companies whose stock prices have fared much better than smaller oil and gas producers.
At least the larger oil and gas companies have had a little bit of buying interest as oil prices have climbed.
Index funds, ETFs and big mutual funds still invest in the large oil companies.
The chart above which represents the largest oil companies looks bad.
But at least these companies have experienced a small amount of investor interest.
The junior producers have experienced something else.
As of today there is still no interest in the junior producers.
Investors fled the junior producers and still haven’t returned.
Factor Number Two –
Junior Oil Producers Are Even More Hated!
I founded the Oil and Gas Investments Bulletin in 2009.
I did so knowing perfectly well that it was a tremendous time to be buying shares of oil producers.
In the ten years since the oil market has been a roller coaster.
Oil prices have been all over the place.
We started with oil at $30 per barrel oil in 2009.
The price of oil ran up to $100 per barrel oil in 2014.
Then oil crashed back to $27 per barrel oil in 2016.
And has rebounded to nearly $70 per barrel oil in 2018 and is likely headed higher.
Over all of these humps and bumps…through the troughs and valleys…
My portfolio and the portfolios of OGIB subscribers have done pretty well.
The performance of the OGIB portfolio by years has been as follows (all verifiable through the OGIB website in real time):
2009 – Gain 123%
2010 – Gain 64%
2012- Gain 37%
2012 – Gain 1.7%
2013 – Gain 20.5%
2014 – Gain 18.0%
2015 – Gain 10.0%
2016 – Gain 28.0%
2017 – Gain 17.0%
There are several reasons that we have been able to keep making money no matter what the price of oil has done.
One of the big ones is that I focus the OGIB portfolio on quality.
Always.
That is especially true when I look at junior oil and gas producers.
I insist on quality management, quality assets and quality balance sheets.
I will accept nothing less. I never compromise.
Yes, I miss out on some big winners because of this disciplined approach. Every once-in-awhile cheap stocks become expensive.
But history says that’s rare. Staying disciplined has allowed me to build this track record of compounding my wealth.
I stick with the low-cost companies that are profitable in bad times and wildly profitable in good times.
This focus on quality has done well for OGIB subscribers and for myself.
Unfortunately for many oil and gas investors however…not all junior oil and gas companies are high quality businesses.
In fact, a large percentage of the junior sector is not quality at all.
These marginal companies can do ok when oil prices are high.
But when oil prices collapse these companies get exposed.
That is why countless oil and gas companies were forced to declare bankruptcy in 2015 and 2016 after oil prices crashed.
As a result, many investors lost their shirts.
Not just retail investors, but institutional investors too.
The result of all of this carnage is that the junior oil and gas space is now viewed as non-investible by many…if not most investors.
The oil sector in general is despised. The junior oil sector is viewed by most investors as completely untouchable.
It is a “no-go” zone.
That includes both retail money and the pros.
There is no competition in the junior sector today for focused investors today who are hunting for bargains – and that gives us a huge advantage.
Factor Number Three – No Big Analyst Coverage
After oil prices crashed in 2014, buying interest in the oil sector dried up.
With no demand the Wall Street banks did what anyone would do.
They stopped spending money covering oil and gas producers.
It was a money losing proposition for them.
Yes, the large producers still have coverage.
But the attention being paid to the junior space became virtually non-existent.
Fund managers had already deserted the sector.
With no analysts putting junior companies in front of those institutional investors there was even less attention given.
When I found this company there was just one small firm covering the story.
To this day, there is no major firm covering this company—despite its growth rate and high profitability.
Why is that? Because they are so profitable they don’t have to raise equity!
This lack of coverage is keeping the institutional investment community away from this stock. There are no analysts pushing them towards it.
For now, that is…
Factor Number Four – Huge Insider Ownership
As you’ve seen, there are many external factors that have caused this company to slip through the cracks.
There has to have been for this company to be trading at an absurd 2 times leading cash flow even though the company is growing at a rate of more than almost 100 percent annually.
To review,
1. The oil sector is hated and neglected.
2. The junior oil sector is more than hated…it is despised and avoided like the plague, and…
3. The company has almost no analyst coverage.
But those are all external factors.
There are also company-specific reasons that have helped to create this absurd valuation.
One of those is that up until now the company has simply not marketed itself.
It has not been out telling its story.
No quarterly conference calls.
No beating the bushes at energy sector conferences.
No roadshows with analysts.
Not only is there a lack of people out there to tell the story of a junior oil producer.
There hasn’t been anyone inside the company willing to tell the story either.
But here’s the thing…
This lack of self-promotion up until this point has been entirely by choice.
One-third of this company is owned by a single individual – a man who is a legend in the oil and gas business.
He has intentionally been keeping this company off the radar so that he can execute his long-term business strategy.
Attention up until now would not have been a positive for the company.
It has been an advantage for this company to operate in the shadows and off the radar.
When you own a third of the company and are thinking about the long term you don’t really care where your company’s share price is over the short term.
Especially when attention would be disruptive to your long-term game plan.
The progress that this company has made has been intentionally kept off the radar.
Quiet operations were a key part of the strategy.
Until now…which is yet another reason why right now is the perfect time for me to be putting this fat pitch in front of you.
The investment world is soon to become much more familiar with this company and its absurdly low valuation.
Factor Number Five – Location:
You Are Looking for Oil Stocks in the Wrong Place
I’m sure you are well aware of it.
You have been sniffing around the oil and gas sector for a while.
All that you keep hearing about is how great the Permian is.
You keep hearing things like “The Permian is the 800 pound gorilla of the oil industry…”
Or “The Permian is bigger than Saudi Arabia’s epic Ghawar oil field…”
Hey….it is absolutely true.
The Permian is great!
It is huge….
It is profitable…
It is growing production…
The problem is that everyone knows this!!!
The result of that is that the greatness of the Permian is reflected in the valuations of the companies operating in it.
Remember…markets are efficient when everyone is looking at the data.
And everyone has been looking at the Permian.
Finding a bargain stock in the Permian today is incredibly hard for investors.
If you really want a bargain you would want to go where the market isn’t looking.
You would want to go to a place where the market it much less efficient.
A place where investors and oil companies alike haven’t been looking…
That clearly isn’t the Permian.
Instead how about a place like the oil play that everyone has forgotten about?
A region that was once highly coveted.
But is now old news.
That place is the grandfather shale oil play.
The original shale oil boom…
THE BAKKEN !!!!
Yes, the Bakken.
While the entire industry has been falling all over itself about the Permian Basin…
Big things have been happening in the Bakken.
Companies have made a huge change in the profitability of the wells being drilled there.
There has been another giant leap forward in the completion technologies that companies are putting to work in the Bakken’s oil rich formations.
In fact, the changes in completion (fracking) technologies are so good that the play is now actually offering wells that are better than the Permian.
Like the $26 per barrel breakeven prices that I have told you that my favorite new oil producer is generating.
The chart below is from major Bakken producer Continental Resources (CLR-NYSE) speaks volumes.
The chart shows the profitability of Bakken wells at various oil prices.
The different lines represent different years of drilling.
With each passing year completion technologies evolve and the well results get better.
Please turn your attention to the blue line which represents 2018 wells that have so far been completed with these new step change technologies.
What a difference!
Let me walk you through the numbers.
I’ll focus in on $65 WTI oil price which is roughly where we are today.
Bakken wells drilled in 2012 generated only a 10 percent rate of return at $65 oil.
In 2014 the number inched up to 20 percent…
In 2015 it was 40 percent…
In 2017 these Bakken wells could generate 65 percent rates of return…at $65 WTI prices.
To be clear none of those rates of return excite me.
They would not get my investment dollars.
Not even close.
But look at what has happened in 2018.
And it happened while all of the attention of the industry and investment community was focused on Permian.
Profitability of Bakken wells at $65 didn’t inch higher as they had over the previous six years…
Profitability of Bakken wells made a giant leap forward.
2018 Bakken wells are generating an astounding rate of return of 140 percent!!
That is huge.
Think about what that means.
The profitability of Bakken wells has more than doubled.
That means that the value of Bakken acreage has also more than doubled.
I’ve dug into the economics of this new Bakken well “type curve.”
They are phenomenal.
Wells are paying out the entire cost of drilling and completing them in just over six months….and that is better than best portions of the Permian.
The present value of each drilling location is now a massive $14 million.
The new type curve is resulting in additional $2.8 million of cash flow from each well in just its first year.
Break-even pricing is down to $26 per barrel.
Let me say that again……TWENTY-SIX DOLLARS PER BARREL!!!
The Bakken has been given a whole new life.
Yet the investment community has missed it.
But it is starting to catch on as the price of oil rises.
Eventually as more institutional eyes get focused back on the Bakken they are going to find this little company that has put together an incredible land package…
Right in the core of the Bakken. Not on the edges…but in the heart of the play. The core of the core. This is Tier 1 acreage…where the flow rates and profitability is the highest in the USA right now.
What these institutional investors are also going to find is that this little company is growing at an annualized rate of more than almost 100 percent per year.
And has a stock price that is trading at the most absurd valuation that most of them will have ever seen – just 2 times leading cash flow!!!!
I Keep Telling You 2 times leading Cash Flow Is Absurd – What Would Be Normal?
I keep repeating the same numbers to you.
A growth rate of almost 100 percent.
A valuation of 2 times leading cash flow.
I keep doing that……
Because I can’t believe that the numbers are real.
Yet they are.
I’ve crunched them over and over again and I lay them out in full in the comprehensive company report that I will show you how to access.
The reason that I can’t believe the numbers is that they are truly absurd.
Companies that are barely growing trade for 6 times cash flow – and higher.
This company isn’t just growing.
It has the fastest growth rate that I’m aware of…
And it is growing like this while living within cash flow.
Incredible…
I’ve seen growth like this before but it always comes from companies that are borrowing money to achieve it. These other companies that add on debt…they are ticking time bombs.
My company is nothing like that. It’s rock solid.
Which is why…beyond dispute…that this valuation is absurd.
A product of a completely ignored corner of the market.
That is something that can’t last forever.
Early investors are being given a gift here.
All of the factors that I laid out earlier have resulted in the market becoming completely inefficient for Bakken focused junior oil producers…
Especially one that isn’t even listed in the United States.
But time is of the essence. To take advantage of this once-in-a-generation opportunity, investors must pounce quickly. That’s because the wheels of change are in motion for this company…
- There are just two small firms covering the stock…
- And the rise in oil prices finally has big institutional money looking into the junior oil space.
What we have right now is a rare opportunity to swing for the fences.
This is a fat pitch that deserves your very best Barry Bonds homerun swing.
And yes I’m talking about a Barry Bonds jacked-up-on-steroids kind of swing.
This company shouldn’t be valued at 2 times leading cash flow.
This company should be valued at multiples of the current 2 times leading cash flow.
Low to no-growth companies trade at six times cash flow.
Fast growing companies that have growth rates close to 30 percent get valued at 7 to 9 times cash flow.
This company is growing significantly faster than that.
I expect that you can do the simple math required to figure out what a more appropriate valuation might be……and what that would mean for this company’s share price.
There Is Huge Upside to $70 Oil In The Junior Producers
The investment world has a terrible taste in its mouth when it comes to the oil sector.
For the junior oil sector that taste is beyond terrible…it is rancid.
Over the past few weeks for the first time in years we have finally started to see some institutional money flowing into the junior names.
These institutions came back because they had faith that the worst of the oil crash is finally behind us.
Once the institutions really start digging into these junior names what they are going to discover is that not only are these companies not valued for $70 per barrel oil.
They aren’t even valued for $50 per barrel oil.
Most of these junior companies are still priced as though there very survival is still in doubt.
That is especially true for companies that are operating outside of the Permian Basin.
The junior companies in the Bakken are still priced for bankruptcy.
Knowing that…let me ask you a question.
Does a company that is able to grow at an annualized rate of more than almost 100 percent while living within cash flow seem like bankruptcy is imminent?
No it sure doesn’t.
But I’ll tell you what, that 2 times leading cash flow valuation implies that the market actually believes that bankruptcy is imminent.
That isn’t the case though. This company is thriving.
The crazy valuation is because the market doesn’t currently have any clue about this company.
The market doesn’t even know it exists.
As the institutional dollars start flowing back into the junior space…that is going to change.
The market is going to become a lot more efficient.
The valuation for this company is going to become a lot more appropriate.
That revaluation is going to happen very quickly.
No Question – This Is the Best Junior Oil Stock Bargain I’ve Ever Found
I’ve been doing this a long time.
My OGIB subscriber service is now ten years old.
I’ve been active in the capital markets a lot longer than that.
I can honestly say that this is the most severely mispriced stock that I have ever come across.
As I keep saying, the current valuation is absurd.
What makes it even more absurd is the fact that a serial company-building entrepreneur is involved here.
A man worth well over $100 million dollars.
Investors should be climbing over top of each other to own shares beside him.
You see, he has put a huge chunk of his massive net worth into this company—over $35 million of his own money.
I don’t pound the table on a stock very often.
In fact, I’ve only done it three times before since I launched my OGIB service.
In each case I was able find instances of extreme market inefficiency.
It is in this type of environment that share prices can be nonsensical.
This kind of absurd bargain doesn’t happen very often…
But it does happen.
These are the rare fat pitches that you need to take advantage of because they have a material positive impact on your net worth.
You may not remember it…but I’ve tried to get you onboard fat pitches before.
In fact as a member of my e-mail list I actively tried to convince you to take a look at each of the other three times I have issued a table pounding buy on a stock.
Let me remind you of those three instances where I was able to exploit severe market inefficiency so that you don’t miss out on this one.
The Market Is Inefficient – Example #1
I’m an energy investor.
Let me tell you what that means and doesn’t mean.
What it doesn’t mean is that I buy oil and gas producers and pray that commodity prices go up.
One look at my track record will tell you that.
In 2014 when oil prices collapsed by 50% my OGIB real money portfolio went up by 18%.
In 2015 when countless oil producers were forced into bankruptcy my OGIB portfolio still went up — and still by double digits
Even in 2016 when oil traded as low as $27 per barrel my OGIB real money portfolio went up by 28 percent.
Here is what I believe…
The oil and gas business, like any commodity business is cyclical.
Therefore, it should be invested in accordingly.
You don’t suffer from the cyclicality…you EXPLOIT IT!!!
The cyclical nature of this business is what creates the best trading opportunities.
In March 2009 I launched the Oil and Gas Investments Bulletin because I believed there was an incredible opportunity to profit in this sector.
My analysis at the time told me that OPEC had taken enough oil off the market to send oil and related stock prices higher.
I was right.
And then – on the other side of the coin – in late June 2014 I e-mailed my subscribers and told them that I was going to start unloading my oil and gas stocks.
I didn’t know that oil was about to collapse, but I was certain that the time to sell oil and gas stocks was after a great six month run and when oil was over $100 per barrel.
I was right again.
It wasn’t rocket science…just a combination of experience and common sense.
Between 2009 and today some of my very best trades have come outside of oil and gas but still within the energy sector.
In 2013 and 2014 I made the most money I ever had to that point on a single trade by owning a US listed ethanol stock. Ethanol is gasoline made from corn instead of oil. In the USA, gasoline retailers must use 10% ethanol per year in their gas.
My research and network of contacts turned me on to the fact that after two years of drought and high corn prices…in 2013, a record corn harvest was a sure thing… and that ethanol producer margins would blow out—in a very good way.
The fall corn plant of 2012 was one of record levels and my research showed that the winter and spring weather were cooperating to create a record corn harvest.
A record harvest means low corn prices.
For ethanol producers that is tremendous news as corn is their primary input cost.
On top of this great news on the cost side the little-known “RINS” market was also sending a screaming signal to get long ethanol producers.
In early 2013, each new crop report confirmed the first big corn yield in years…and this ethanol opportunity was the biggest Fat Pitch I had found in years.
Further due diligence revealed that an undiscovered company named Pacific Ethanol (PEIX-NASD) was the best way to profit from this opportunity.
Recognizing this as a rare fat pitch I bought aggressively and told my OGIB subscribers to do the same.
It was a no-brainer trade and I verified everything that I thought was going on with some of the very best minds in the business.
I purchased Pacific Ethanol (PEIX-NASD) at $3.15 in November 2013, and sold it at $23 in July 2014.
Many of my subscribers did the same.
That’s not a typo—it went up by $20 a share in just nine months.
A seven bagger in just over half of a year.
You want to know why I sold it there? It was simple…the CEO just sold some stock…in fact it was his largest sale to date.
When I bought Pacific Ethanol the company was underfollowed and inefficiently priced.
Seven months later the market had caught onto the story.
The Market Is Inefficient – Example #2
The hardest thing to do is get an edge in a sector when investment interest is high.
It is much easier to exploit the cyclical nature of the energy sector than it is to outperform when oil stocks are in vogue.
That is why I was so proud of what I was able to accomplish in 2012 with DeeThree Exploration.
This was my big winner in a market environment where it was incredibly difficult to find value.
I had to dig deep for this one.
In 2012 everyone believed that oil prices were headed higher and not ever coming back.
Peak oil was very much a mainstream opinion.
At that time the market just didn’t understand just how much shale production was going to grow over the next three years.
You couldn’t find anyone who thought we would see $50 per barrel oil again.
In 2012 companies were priced for sustained high oil prices.
That was especially true the exciting, fast-growing juniors that the market had a taste for.
I owe the credit for the discovery of DeeThree to my most valuable asset.
That being my research network; my network of contacts in the energy patch.
I’m talking about people involved directly in and around the energy patch.
I’ve spent years of my life building up this network and it took blood, sweat and tears to do it.
All of that effort is worth it when I get tipped off to an investment opportunity like DeeThree Exploration.
What happened in 2012 I was able to discover a small and entirely new oil play that the market barely knew.
The analyst community wasn’t onto it.
And the companies involved really weren’t talking much about it either—because they were still accumulating land.
The companies didn’t want word getting out and land prices being driven higher.
I caught wind of the fact that something special was going on…and once I confirmed this I immediately told subscribers to back up the truck on DeeThree Exploration.
I did the same with my own family’s money…I invest real money in every company that I recommend to subscribers.
I told my subscribers that major production increases were coming.
And that none of that production growth was priced into the shares of DeeThree exploration.
Those production increases did come…and we rode the stock from $2 to $12 over the course of half a year.
A six-bagger!
In a market where finding value was next-to-impossible.
The Market Is Inefficient – Example #3
In June 2016 one of my oil industry contacts told me to look at a small producer that to me, looked like it might go bankrupt very soon.
The company was Resolute Energy symbol REN on the NYSE.
It didn’t take me long to figure out why I had been pointed in this direction.
Texas oil billionaire John Goff had quietly built himself an oddly big position in this stock.
He’s not buying a stock that’s about to go bankrupt.
And when I started working the story hard, I discovered that something big was happening in the Delaware Basin.
There were rumblings that someone had “cracked the code” on the play and that the economics of drilling Delaware Basin shale oil wells had experienced a step- change improvement…
…much like what has happened in the Bakken with the company that I’m going to give you a full free report on today.
If the rumblings I had heard in the Delaware Basin were true, I recognized that would mean that these wells had gone from marginal rates of return to having virtually the lowest break-even costs on the continent.
In other words, acreage in this play had gone from not having much value to being extremely valuable.
And in doing so would create a multi-multi-bagger for investors.
Connected as he is, billionaire Goff was clearly aware of what was going on.
He had figured out that when the play went from marginal to superior, the value of Resolute Energy’s big acreage position went from a few hundred dollars per acre to tens of thousands of dollars acre—in just weeks.
So I rolled up my sleeves and I got to work.
I worked my network of contacts.
I dug deeply into what the companies around Resolute were doing.
What I was able to confirm was that the market had completely missed the boat on how valuable Resolute’s Delaware Basin acreage now was.
With few investors looking at this region the market for Resolute’s shares had become incredibly inefficient.
I could hardly contain my excitement.
I knew I had found an inefficiently priced stock that was worth multiples of the current trading price.
Convinced that this was the biggest fat pitch I had seen since Pacific Ethanol I took a huge position in the shares of Resolute.
I advised my OGIB be subscribers to do the same. The stock was $7. I told them at the time my research showed it was worth $47. I admitted to them they probably thought I was crazy because that number was so outlandish.
The result was spectacular.
I had thought the market reaction to Pacific Ethanol was impressive…
Over the 12 months that followed my discovery of Resolute Energy…
The stock went from $2 to almost $50 per share.
A 25 bagger in a year!!!
My subscribers and I enjoyed much of this ride.
I gradually sold on the way to the top.
The similarities between this experience with Resolute and the company I’m here to tell you about today are eerie:
- Small undiscovered companies (this one is actually much smaller)…
- Incredibly valuable acreage with wells that generate huge rates of return (the Bakken wells are actually even better)…
- And extremely wealthy and successful oil men owning large percentages of the company (this time the ownership interest is even larger).
The only real difference is that this Bakken producer is even cheaper.
Even Resolute wasn’t trading at 2 times leading cash flow!!!
Did You Ignore My Pounding the Table On
Pacific Ethanol,DeeThree Exploration,
And Resolute Energy?
I hope you didn’t, but I know that many people did.
If you are on my mailing list, you would have received an e-mail from me pounding the table on each of these three stocks.
A 7 bagger in 7 months.
A 6 bagger in less than a year
A 25 bagger in 12 months.
When I get a truly exceptional idea…
I tell you about it. It is in my best interests to do so.
Why?
Ideally so that you can share in the opportunity as an OGIB subscriber.
If not that…at least it allows me to come back to you later as I’m doing now and show you how well that previous opportunity worked out.
Today with this Bakken producer we have a rare edge: A company growing at an annualized rate of almost 100 percent.
With oil wells that have breakeven prices of $26 per barrel
Yet this company is valued at just 2 times leading cash flow.
That’s a mere fraction of what the company should be valued at.
This is a case where we are going to get an explosive combination of growth and revaluation of the company’s shares.
This is going to happen simultaneously and the share price of this company is going to rocket higher.
I just put $200,000 of my own money into the shares of this company.
This is the kind of opportunity I wait for, for months…usually 18-24 months a stock comes along like this. It’s been 24 months since Resolute Energy.
This is a unique opportunity.
A Giant Fat Pitch.
Very close to doubling production in 2018—and I think they will come very close to doubling production again in 2019–yet trading at 2 times leading cash flow.
And it’s in an oil play that is now the most profitable on the continent.
I’m putting my money where my mouth is on this–a lot of my money.
How I Did I Find This Company?
I showed you how the OGIB portfolio has performed since I launched my service in 2009.
It has gone up every year.
Nine years in a row.
Only one of those years the returns weren’t at least in the double digits.
I’m very proud of this…especially considering the fact that the oil and gas sector has been a brutal place to try and make money most years.
The energy sector has significantly underperformed the S&P 500 since I launched the OGIB portfolio in 2009.
Yet I have managed to significantly outperform the S&P 500.
How did I do this?
The short answer is by taking advantage of the really big opportunities like the one in front of us today.
The long answer is that it wasn’t easy.
Just like it wasn’t easy to find a company growing at an annualized rate in excess of almost 100 percent and trading for 2X leading cash flow.
Finding something like this starts with being lucky.
Of course, I also spend a lot of money on research.
Tens of thousands of dollars every year.
I get every analyst report available on every company.
I subscribe to services that cost multiples of mine that are run by brilliant investors.
And I know everyone in and around the energy sector.
My rolodex is overflowing with names and numbers.
Analysts, hedge fund managers and entrepreneurial CEOs.
Because I represent well over 1500 investors–these men and women are happy to take my calls.
So when you ask me how it is that I found a company growing this fast and trading at 2 times leading cash flow…
My long answer is that I found it by working 330 days a year, spending hundreds of thousands of dollars over the past decade and reading everything that I can get my hands on.
My short answer is that in this particular instance I discovered that a very rich man had taken a very large position in a company that he should have no business being interested in.
That got me curious.
And once I’m curious I beat a story until I understand it completely.
What I’ve come to understand about this company is that I’ve seen a movie like this before.
It was called Resolute Energy and it turned out to be a 25 bagger.
The only difference is that this company is even cheaper.
What Else Can I Tell You
About This Company?
The coolest thing about this undiscovered Bakken producer that is trading for 2 times leading cash flow is how management came to accumulate its high-quality land position.
It is a story that is all about discipline.
Painful, dull, tedious and repetitive work.
I’ve already told you about these company’s Executive Chairman and largest shareholder.
A wealthy man, worth over $100 million dollars.
In fact, he put over $35 million dollars into this company’s shares alone.
One reason for this is…he is competitive like few people you will ever meet on this planet.
Second, he saw a long-term strategy nobody else did—building a “best in class” acreage position in a play nobody else was paying attention to anymore.
Everybody else was focused on the Permian. He was focused on buying everything he could—which was a lot—in the Bakken.
He wanted every well that this company drills to be a great investment…to generate big returns on investment.
With this strategy in hand when he assumed control, this Executive Chairman, and his team went to work.
That work involved an operation that they called “Smile and Dial”…
These boys relentlessly worked the phones.
They tirelessly knocked on countless doors.
They spent hours poring over land ownership records in basements of county courthouses.
The objective was to slowly but surely piece together a good-sized land position made up of core Bakken acreage; not the good stuff but The Best Stuff.
They first bought small working interests in tiny parcels of land that larger producers couldn’t be bothered with.
It was a slow process. But over time, they were able to buy larger interests in larger land packages, and then do some serious horse-trading to become operator over a large acreage of Tier 1 Bakken land.
In total, over several years the team was able to build that high quality land position that the Chairman desired.
The land was core of the core of the Bakken.
It was accumulated by relentlessly targeting the landowners that they knew had the best available undeveloped acreage.
It took an astonishing 60 deals to assemble the land package that the company now owns.
They carved out this acreage out right from underneath the noses of The Big Boys that are operating in the Bakken.
And the interesting thing is…these Big Boys are OK with it. If somebody else can assemble a huge contiguous land package of Tier 1 land…they’ll buy it.
My junior company has done it by “Smiling and Dialing”, and eventually putting together a serious package of land.
By repeatedly putting one foot in front of the other this company was able to travel an enormous distance…to build a significant, core land position.
There aren’t many companies that could have pulled this off.
This took years and an incredible amount of patience and discipline.
I attribute the reason that this company could accomplish this to the fact that the Man-In-Charge is the single largest investor in the company.
He isn’t there for the paycheck.
He is there because he wants to build shareholder wealth…
Building shareholder wealth is something that he has most definitely done.
This Chairman is so competitive, no Tier 1 land position in the Bakken will be big enough. But now that he has critical mass—did I mention he now has a 7 year drilling inventory?—this man and his team are starting to monetize their investment.
That means cash flow is about so SOAR. It’s a cash flow gusher.
They are ready to see their hard work reflected in the share price of this company.
This absurdly low valuation of 2 times leading cash flow may exist today…but I guarantee you it isn’t going to be around for long.
What Happens Next: It’s No Mystery How This Profit Scenario Unfolds
I don’t think it is too hard to figure out how the next couple of years for this company will unfold.
We have one of the great North American oil entrepreneurs who owns a third of the company—he has put $35 million of his own capital into it!
He effectively controls this business.
That is a great thing for shareholders.
At no point was this man reliant on the capital markets to build this company – he financed it himself.
He built the company slowly…painstakingly slow – building up a sizable land position…
A land position made up exclusively of the land in the core of the core of the Bakken.
Then he waited for the right moment to kick off the explosive growth that he knew these assets were capable of.
That moment arrived in 2018.
First…the Bakken had a step change in completion technology that pushed the returns from drilling through the roof.
Second…the price of oil moved higher.
Now it is time to hit the gas pedal.
There are just two small firms that now follow this company.
People are starting to catch on to the story.
Two times leading cash flow won’t last for long.
Those analysts are projecting for production to more than double in 2018 year on year.
In fact, production at the end of 2018 is going to be almost FIVE TIMES where it was at the end of 2017.
Then I expect production and cash flow to nearly double again in 2019! As author Dave Barry says—I AM NOT MAKING THIS UP.
From the end of 2017 to the end of 2019 production I expect that oil production and cash flow should increase tenfold.
Cha-cha-cha…Ching!
Now you know why I’ve got $200,000 of my own money invested in this company.
Of course, the company’s Chairman has a lot more invested than that of course.
He has over $35 million invested.
I can guarantee you that he will not be selling those shares on the open market.
I do believe however—that after production goes up tenfold—that it is more than likely he will be looking to monetize his position.
To cash out and reap some huge profits.
This exit strategy is not going to be complicated.
The land position is the core of the core of the Bakken.
He was able to put it together one tiny deal at a time.
The big Bakken players surround this company.
Now that all of this acreage has been consolidated in one company they are chomping at the bit to own it.
The only question is what is the price that they are going to pay?
The answer is that they will be paying a fair price.
That fair price sure isn’t two times cash flow.
I’ve shown you that slower growth companies trade at six or seven times cash flow.
Plus, that amount of cash flow is skyrocketing higher.
Production will increase tenfold before this Chairman will consider selling towards the end of 2019.
You don’t need to be a math whiz to figure out that when the monetization event occurs…it will be at multiples of the current share price.
Why There’s Urgency…
I can’t stress enough that if you are interested in this company now is the time to be digging in.
Only two analysts have discovered the story. I’m #3.
I can see their influence in the number of shares being traded.
Oil prices are up…and more analyst coverage is coming.
That means more institutional money will start to accumulate shares.
Further…this company is ready to take its show on the road.
The entrepreneurial Chairman who built this business is ready to show it off.
He is ready to see the stock price start reflecting the value of what he has created.
Additionally, the amount of drilling this company is doing is ramping up.
As that happens production is going higher and so are cash flows.
That makes the company bigger and puts it on even more radar screens.
This company is absurdly valued…only because the entire market has been oblivious to the story.
That is changing quickly…even my interest here draws more attention.
I’ve got many institutional subscribers to my Oil and Gas Investments Bulletin.
What this boils down to is…
You can buy a well-known company trading at 6 times cash flow growing at 10 percent per year.
Or…you can buy this company growing at almost 100 percent plus per year and trading at 2 times leading cash flow.
I’m not trying to tell you that I find these things every week…I don’t.
I’ve found three in a decade…this will be four.
Please Make Sure You At Least Take A Look At This Absurdly Mis-priced Company
I spend all of my time looking.
330 days a year—and long hours each of those days.
Even with all of that work I’ve found only 3 Big Fat Pitches in the past decade.
I spoke to those Fat Pitches earlier.
All three of them generated multi-bagger returns and all three of those big returns happened very quickly.
This is Great Big Fat Pitch number four.
I’m not asking much of you.
In fact, all I want you to do is take a look at my free full report on this company.
You take no risk, and get the opportunity to see if you think this company offers the reward that I think it does.
I put $200,000 of my own money into this one…and the Chairman has tens of millions of his own money invested.
Neither of us would have done that if we didn’t truly believe…
You have nothing to lose and potentially a giant windfall to gain.
Click the button below to get my FREE, No-Risk Report that reveals the name of this stock – and everything you need to know to invest right away.
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Your Risk-Free trial subscription to my Oil & Gas Investments Bulletin will also keep you up-to-date on this company’s activity as developments unfold.
But sitting on the sidelines is not an option – if you miss the boat on this one, you can’t say I didn’t give you advance notice.
This is only the fourth “Pound-The-Table” recommendation I’ve made – and we knocked the first three completely out of the park.
There’s absolutely zero risk – so take a moment now to claim your FREE report and learn the name, trading symbol and story behind this absurdly low valuation company right now.
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