Gas and oil deposits found trapped within shale formations are becoming an increasingly important source of energy, especially in North America. The U.S. government’s Energy Information Administration has predicted that by 2035, 46% of the national gas supply will come from shale gas. Oil trapped deep underground these areas will represent up to 12% of the world’s total oil production by the same year according to a PricewaterhouseCoopers report. While there are several well established major players, let’s focus our attention on some overlooked small cap options in this promising field.
Halcon Resources Corp (NYSE:HK)
Halcon Resources is an independent energy company engaged in the acquisition, production, exploration, and development of onshore oil and natural gas properties in the United States. The company has over 450,000 net acres distributed across three different formations:
• Bakken/Three Forks (North Dakota and Montana)
• Woodbine/Eagle Ford (Texas)
• Utica/Point Pleasant (Ohio and Pennsylvania)
A brief glance at the company financials reveals that the company has a huge debt load; in fact, it is bigger than the current market cap ($2.51 billion vs. $2.29 billion). The stock price has been hovering between $6 and $8 for the last six months, lower than the analyst’s median target of $10. Most analysts give the company a buy recommendation. Renowned investor Ken Griffin recently increased his stake in the company to over 18 million shares.
Triangle Petroleum Corporation (NYSEAMEX:TPLM)
Triangle Petroleum is a growth-oriented oil and gas exploration and development company focused on the Bakken and Three Forks formations where it holds approximately 86,000 acres across Montana and North Dakota. The company has a current market cap of around $320 million, including $39 million in cash. The debt load is a rather manageable $148 million.
RockPile Energy Services is a wholly-owned subsidiary which provides hydraulic fracturing services not only to Triangle Petroleum Corporation (NYSEAMEX:TPLM), but also to third-parties exploiting fields in the Williston Basin. RockPile’s integration with Triangle’s plan is not clear at all, with senior management, including president and CEO Jonathan Samuels, failing to formulate a coherent strategy for the unit when requested to.
One final note of caution, a significant part of the acreage located in Montana is in a peripheral region of the basin, which is so far largely undeveloped so its actual value is a question mark for the time being.
Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)
Carrizo Oil & Gas is a Houston-based energy company actively engaged in the exploration, development, exploitation, and production of oil and natural gas with over 200,000 acres divided across the following regions:
• Eagle Ford Shale in South Texas
• Barnett Shale in North Texas
• Marcellus Shale in Appalachia
• Utica Shale in Eastern Ohio,
The company has a current market cap of $1.07 billion (with $729 million in debt) and has archived record total production (26,600 Boe/d) as well as record adjusted revenue ($118.2 million) and EBITDA ($93.3 million) in its previous quarter.