Why Stifel Likes Northern Oil & Gas's Williston Basin Play

Northern Oil & Gas, Inc. NOG, an oil and natural gas company located primarily in the Bakken and Three Forks formations within the Williston Basin, is an attractive stock that can double in value from current levels, according to Stifel.

The Analyst

Stifel's Derrick Whitfield initiated coverage of Northern Oil & Gas' stock with a Buy rating and $3.10 price target.

The Thesis

Northern Oil & Gas is an attractive energy company with a differentiated asset performance in an attractive basin with few competing investment alternatives, Whitfield said in the initiation note. (See the analyst's track record here.)

The company has succeeded in positioning itself as a leading "non-operating" producer and consolidator within the Williston Basin, Whitfield said. Northern Oil & Gas has managed to establish a "significant" competitive advantage over its rivals through its more than 3,500 Bakken wells across 143,000 net acres over the past 10 years, he said. 

The Williston Basin is becoming the "preferred quality basin for investors to hedge their Permian Basin exposure," according to Stifel. Williston properties can generate PV-10 positive return in a $30-per-barrel price environment, Whitfield said. Unlike the Permian, the Williston has a lower API crude quality, which is preferred by refiners with ample take-away capacity and lower inflationary pressures, he said. 

Northern Oil & Gas is likely to end 2018 with greater scale and growth, which adds to the bullish case for owning the stock, Whitfield said. The analyst's $3.10 price target is based on a 30-percent discount to an estimated net asset value of $4.41 per share.

Price Action

Shares of Northern Oil & Gas were trading higher by more than 4 percent after the open Monday. 

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