$3 Dollar Shale Play Destined To Go Higher

Domestic energy production has exponentially increased over the last few years due to fracking technology. No place has ramped up energy production more than the Bakken reserves. Numerous E&P outfits with shale acreage/production have seen their shares doubled, tripled or more in the past twelve to eighteen months, and it is certainly harder to find bargains now than it was in 2010. In addition, M&A activity is increasing, as major players like Statoil (STO) look to gain footholds in promising North American shale acreage. Here is one shale play that is actually down from where it was a year ago, and is rapidly growing revenues, production and earnings.

Voyager Oil & Gas (VOG) - "Voyager Oil & Gas, Inc. engages in the exploration and production of oil and gas in the United States. It primarily focuses on oil shale resource prospects in Montana, North Dakota, Colorado, and Wyoming. As of May 17, 2011, the company controlled approximately 141,500 net acres in the five primary prospect areas comprising 28,000 net acres targeting the Bakken/Three Forks in North Dakota and Montana; 14,200 net acres targeting the Niobrara formation in Colorado and Wyoming; 800 net acres targeting a Red River prospect in Montana; 33,500 net acres in a joint venture targeting the Heath Shale formation in Musselshell, Petroleum, Garfield, and Fergus counties of Montana; and 65,000 net acres in a joint venture in the Tiger Ridge gas field in Blaine, Hill, and Chouteau counties of Montana". (Business Description from Yahoo Finance)

7 reasons VOG belongs in the speculative part of your portfolio at $3 a share:

• The company just closed on a $150mm credit facility at attractive terms (First $100mm at 3.25% over LIBOR).
• The median analysts' price target for the five analysts that cover Voyager is $4.50.
• VOG was selling near $6 a share a year ago. The stock is showing increasing technical strength and recently crossed over its 200 day moving average (See Chart)

• EPS is projected to have a significant ramp up. Voyager lost 11 cents a share in FY2010, is projected to lose a penny in FY2011, and the company is expected to earn 19 cents a share in FY2012.
• Revenues are on a higher expected curve. Revenues were just under $1mm in FY2010, look to come in around $10mm in FY2011, and analysts expect over $40mm in FY2012. With the new credit facility powering its exploration plan, the company believes it will be producing 2200 to 2500 barrels of oil a day by the end of 2012.
• Earnings estimates for FY2012 have increased significantly over the past two months.
• ·Given the company's ramping production, small market capitalization and attractive acreage, this small E&P outfit could make a logical and easy acquisition for a bigger player trying to gain assets in the Bakken.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in (VOG) over the next 72 hours.