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Monday, February 28, 2011

Why ESTE may be the Next Big Oil Momentum Stock

Earthstone Energy, Inc. (ESTE) completed a reverse split on January 3, 2011 in order to get listed on the Nasdaq Read Press Release. That left them with only 1.7m shares outstanding and a public float of 1.2m See Bloomberg.

ESTE had EPS for the last 9 months of $0.69. Last quarter they had a one time deferred tax adjustment for statutory depletion. EBITDA grew to $2.3m for the first 9 months or $1.35 EBITDA per share for the first 9 months. The oil revenue for the first 9 months has been booked at an average price of $69 per barrel. (Recently oil is $98 per barrel). Read 10-Q.

The Company is expanding with new wells in the Bakken territory. "The Company continues to pursue its strategy of drilling non-operated horizontal Bakken wells along with the acquisition of producing properties in the Montana and North Dakota portions of the Williston basin." Read Press Release. See Company Press Releases

Bakken oil stocks have exploded in the past year. BEXP, CLR, NOG are 3 of them.

BEXP and ESTE are partners:

DENVER, Sept. 23 -- EARTHSTONE ENERGY, INC. (OTC Bulletin Board: BSIC.ob old ESTE symbol ) reported Panther Energy Company, LLC, its
majority partner in the Banks Field, has sold its interest in the field, comprising nearly thirteen thousand gross mineral acres, to Brigham
Exploration Company. This sale does not affect Earthstone's leasehold rights in the area and Earthstone expects to retain its oil and gas
interests. As in the past Earthstone intends to participate in new wells proposed by Brigham, or others, that "pool or space" our leasehold rights
within spacing units they operate.

"We are not just excited by this development, we are ecstatic," commented Ray Singleton, president of Earthstone. "Brigham is on the
forefront of the application of new stimulation technology in Bakken wells and has been instrumental in demonstrating the economic viability
of this area of the Williston basin. With Brigham now involved, we expect the pace of development to heat up. Based on conversations with
Brigham, we anticipate drilling one well, possibly two, on this acreage before the end of the calendar year." Read Article

CLR is at $69 and is expected to do $2.34 EPS this year for a P/E of 30 See Numbers

BEXP is at $35 and is expected to do $1.08 EPS this year for a P/E of 33 See Numbers

NOG is at $31 and is expected to do $0.36 EPS this year for a P/E of 88
See Numbers

Let's assume that ESTE has a conservative $1 EPS run rate. Applying the P/E ratios of CLR, BEXP, and NOG would give ESTE a price range of $30 to $88. Throw in the fact this has a minuscule float and number of outstanding shares and that is why I think ESTE has potential to be the next big oil momentum stock. I am long at $19.

Low float stocks can be volatile and dangerous and are not for chasing or large positions in my opinion.

1 comment:

Share Tips said...

I really appreciate your post and you explain each and every point very well.Thanks for sharing this information.And I’ll love to read your next post too.
Share Tips

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