Brigham Exploration Looks Like a Winner

Isac Simon, The Motley Fool
Updated

With its Q2 performance, Brigham Exploration (NAS: BEXP) has once again shown that the Bakken reserves are playing true to expectations. Last Monday's market crash notwithstanding, long-term investors should see merit in this stock.

The Bakken operator announced record quarterly production, with 12,206 barrels of oil equivalent per day (Boe/d). That beat the previous record of 11,384 Boe/d in the fourth quarter of 2010.

Production volumes from the Williston Basin, at 10,401 Boe/d, represented 85% of total production. It also marks an impressive 88% growth over last year's second quarter.

Not surprisingly, operating income saw a fantastic 320% increase to $81 million. I won't get too carried away with this figure, since the just-ended quarter enjoyed a bull market for oil and liquids, but increased sales volumes did contribute to lower general and administrative expenses. The $2.93 figure per Boe is $0.98 lower than that from the year-ago quarter, and management expects it to fall to $2.21 per Boe in Q3. The perfect combination of higher sales and lower costs is definitely going to see the company through bad times.

Watch out for these
Pure Bakken shale operators such as Kodiak Oil & Gas (NYS: KOG) , Northern Oil & Gas (ASE: NOG) , and Whiting Petroleum (NYS: WLL) have all announced fantastic results. I expect these companies to grow phenomenally in the next few years in terms of production.

The next few months are going to be difficult, as crude oil prices have been shot down thanks to S&P's downgrade. And cash flows won't be as rosy as they were this quarter. However, a fall in demand for oil and gas looks highly unlikely, and Brigham's management expects Q3 production to go up further -- which is what Foolish investors will be looking at.

Foolish takeaway

Increased production should see the company through bearish markets. With expected production for Q3 to average between 15,000 and 16,200 Boe/d, management seems to know what it's up to. Foolish investors looking for some long-term gains shouldn't be too worried. In all, Brigham looks like a winner.

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At the time thisarticle was published Fool contributor Isac Simon owns no shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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