Goldman Bullish On Shale, Independent Drillers

Michael Teague |

Analysts at Goldman Sachs (GS) just returned from a field trip to North Dakota’s Bakken Shale formation, where reserves are estimated at about 7 billion barrels of recoverable oil, and they have good news to share.

In a note on Tuesday, the analysts were unequivocally bullish, saying that they have “greater confidence in our outlook that Bakken production/completion activity will likely exceed Street expectations.” This would seem to be in line with the April 30 release of a US Geological Survey study that doubled up on previous estimates for Bakken’s total recoverable reserves.

While the USGS study naturally did not include any production estimates, Goldman did. While the first six months of 2013 saw an average of 110,000 barrels a day of output, analysts at the bank asserted a far more ambitious production target of 130,000 to 210,000 barrels daily through 2016.

The optimism places a great deal of confidence on the ability of drillers working in the Bakken shale.  Subsequent to the outing, Goldman walked the walk by initiating coverage on two independent drillers: the $18.9 billion market-cap Continental Resources Inc. (CLR) and the $4.17 billion market-cap Oasis Petroleum (OAS). Continental currently trades shares for $106.85 a share, while Oasis trades for $47.08, and the bank has set very bullish targets for both, at $130 and $65 respectively.

Shares for both companies have jumped on the news, with Continental up nearly 4 percent and Oasis adding almost 5 percent. Goldman was also very upbeat about shale in general, especially the large reserves in Texas at Eagle Ford and the Permian Basin, as well as New York State’s Marcellus shale for natural gas.

The recently discovered Monterey shale in California is thought to contain some 14 billion barrels of theoretically recoverable reserves, but the thousands of years of geology under which this oil rests has so far proven to be one of the greatest tests yet to shale explorers, with all the wells that have so far been attempted coming up dry.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GS The Goldman Sachs Group Inc. 235.56 4.18 1.81 6,595,232
OAS Oasis Petroleum Inc. 15.38 0.03 0.20 9,690,128
CLR Continental Resources Inc. 56.57 -1.15 -1.99 2,388,221
BLUBF Blue Ribbon Income Fund Tr Unit 6.88 0.00 0.00 0

Comments

Emerging Growth

Taranis Resources Inc.

Taranis Resources Inc is an exploration stage company. The Company along with its subsidiaries is engaged in the acquisition and exploration of mineral properties. Its projects include Thor Property in…

Private Markets

Pinterest

Pinterest is a visual discovery and planning tool. Users ("Pinners") use the site and apps to get ideas for their future, such as recipes, places to travel, and products to…

GoCoin

Blockchain currencies (e.g. Bitcoin) provide a new disruptive way to transfer value between parties over the internet as opposed to going through banks. GoCoin provides online merchants with a suite…