Three Ways to Profit From US Oil Production: Denbury Resources Inc. (DNR), Continental Resources, Inc. (CLR)

Good old fashioned oil exploration with an innovative
twist

Continental Resources, Inc. (NYSE:CLR) explores the Bakken and other plays for oil and gas.  It does not look for known mature fields like Linn or Denbury; it’s looking for new finds.  To be sure, Continental finds new assets.  During 2012, the company grew its proven reserves in the Bakken 54% over the previous year.  It currently claims top spot as a Bakken oil producer, having achieved a 58% increase in production over the past year.  Fortunately, Continental actively explores for oil and gas in other parts of the US, limiting its dependence on Bakken shale oil.

As an investment, Continental shares took a beating over the past summer, but has recovered somewhat in the fall and winter.  Why should you invest in Continental now?  Two reasons:  First, the expanded use of rail to ship oil from Bakken to refineries on the East and West coasts means Continental should receive more revenue for its oil than it has in the past.  Second, Continental developed what it calls Eco-Pad technology for drilling.  Drilling a well in the Bakken can cost $6-7 million.  With Eco-Pad drilling, Continental can drill four wells on one pad at with a cost savings of 10%.  That translates into a roughly $2.5 million savings for every four wells drilled.  While the company currently trades at roughly 32 times earnings, these two developments should bring increased revenues and profits.  Continental pays no dividend.

Final Foolish Thoughts

After decades of depending on oil coming from countries that generally don’t like us, the United States could finally stand free of OPEC.  For investors, there are different ways to make money on this emerging oil independence. Continental generates revenue as a classic Bakken oil exploration and production company using its innovative Eco-Pad technology to reduce drilling expenses.  Oil transit by rail should also improve earnings.  Denbury focuses on its ability to inject CO2 into mature oil fields and its recent significant acquisition to improve its future oil production.  Linn Energy/LinnCo also focuses on mature productive oil fields and hedges its oil and gas production to insure revenues and distributions.  No matter what your investment style is, there’s an investment for you in US oil production

The article Three Ways to Profit From US Oil Production originally appeared on Fool.com and is written by Robert Zimmerman.

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