While most estimates of the size of the Bakken crude deposits are around 4-5 billion barrels, Hamm believes there are 24 billion barrels just waiting to be squeezed out of the ground. In an interview with The Wall Street Journal in October 2011, Hamm said, “[T]he United States could be ‘completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century.’” And Hamm appears willing to put his money where his mouth is.

But in March of this year, a company owned by Hamm and Continental’s President Jeff Hume sold 38,000 acres in the Bakken play to Continental for $340 million in stock. At the time of the sale, Hamm owned 123 million of Continental’s 180 million outstanding shares. Another 100,000 shares is a rounding error.

According to the company’s proxy statement:

Wheatland Oil Inc. (“Wheatland”) is owned 75% by the Hamm Revocable Trust and 25% by our President and Chief Operating Officer, Mr. Jeffrey B. Hume. Wheatland participates in several of the Company’s crude oil and natural gas properties located in the states of Mississippi, Montana, North Dakota and Oklahoma. The Wheatland interests generally range from 5% to 10% of the Company’s interests. During the year ended December 31, 2011, we disbursed net crude oil and natural gas revenues of approximately $36.7 million to Wheatland and were paid for billed costs of approximately $64.9 million by Wheatland. We also paid Wheatland approximately $5,000 in 2011 for their share of undeveloped leasehold adjustments. At December 31, 2011 $17.6 million was due from Wheatland and $3.5 million was due to Wheatland.

This does not sound much different from the Founder Well Participation Program that Chesapeake Energy Corp. (NYSE: CHK) had going with CEO Aubrey McClendon.

But investors do like insider buying. Continental’s shares are up nearly 6% in late morning trading today at $75.44 in a 52-week range of $42.43-$97.19.

Continental’s proxy filing detailing related party transactions is available here.

Paul Ausick

American Express Co. (NYSE: AXP) Reiterated Buy with $60 target at Argus.
Atmel Corporation (NASDAQ: ATML) Maintained Buy but cut target to $11 at Canaccord Genuity.
BlackRock Inc. (NYSE: BLK) Started as Buy at UBS.
Chevron Corporation (NYSE: CVX) Maintained Outperform but cut earnings estimates at Credit Suisse.
Continental Resources (NYSE: CLR) Cut to Hold with $79 target at Canaccord Genuity.
Entertainment Properties Trust (NYSE: EPR) Cut to Neutral at JPMorgan.
Equity Residential (NYSE: EQR) Cut to Neutral at JPMorgan.
France Telecom SA (NYSE: FTE) Cut to Underweight at JPMorgan.
HSBC Holdings PLC (NYSE: HBC) Cut to Underperform at BofA/ML.
Juniper Networks Inc. (NYSE: JNPR) Cut to Hold at Argus.
Lennar Corporation (NYSE: LEN) Cut to Market Perform at KBW.
Lincoln Electric Holdings, Inc. (NASDAQ: LECO) named as Value stock of the day at Zacks.
MarkWest Energy Partners (NYSE: MWE) named as Bull of the Day at Zacks.
Microsoft Corporation (NASDAQ: MSFT) Maintained Outperform but cut target to $34 from $35 at Credit Suisse; Maintained Hold and lowered estimates at Argus.
Oasis Petroleum (NYSE: OAS) Cut to Hold with $32 target at Canaccord Genuity.
SUPERVALU Inc. (NYSE: SVU) Maintained Neutral but cut target to $7 from $10 at Credit Suisse.

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JON C. OGG

That honor falls to smaller oil producers including Brigham Exploration Co. (NASDAQ: BEXP), Continental Resources, Inc. (NYSE: CLR), Concho Resources, Inc. (NYSE: CXO), Kodiak Oil & Gas Corp. (NYSE: KOG), Forest Oil Corp. (NYSE: FST), Stone Energy Corp. (NYSE: SGY), Whiting Petroleum Corp. (NYSE: WLL), Abraxas Petroleum Corp. (NASDAQ: AXAS), Approach Resources Inc. (NASDAQ: AREX), and Triangle Petroleum Corp. (AMEX: TPLM). Among services companies RPC Inc. (NYSE: RES), which doesn’t currently have any presence in the Bakken, is looking to join the bigger players up in the north country. A midstream company that is expanding its presence in the Bakken is Tesoro Logistics LP (NYSE: TLLP), a recent spin-off from refiner Tesoro Corp. (NYSE: TSO).

And last week, SemGroup Corp. (NYSE: SEMG) announced that it plans to create a new midstream company, Rose Rock Midstream LP, through a $181 million IPO. Rose Rock owns and operates a gathering, storage, transportation, and marketing business in the Bakken.

Current production from the Bakken shale is about 360,000 barrels/day and there are those who believe that figure will reach well over a million barrels/day in another five years. The US Geological Survey estimates about 4.4 billion potential barrels from the Bakken. Continental Resources’ chairman suggests that the real potential is about six times that.

Whatever the production, the problem remains how to get the oil to market. More pipelines are needed to get the oil to somewhere other than the market hub at Cushing, Oklahoma. The Bakken’s crude competes with the heavy crude coming from the Alberta oil sands for pipeline space and markets. Rail and truck transportation currently haul most of the Bakken’s crude.

A substantial portion of the Bakken’s production is transported by rail, which is far more expensive than pipeline transportation. But the high prices for crude are boosting rail transportation from the Bakken to the Gulf Coast to around 100,000 barrels/day this year. Some analysts think that number could triple by the end of 2012.

And there’s no end in sight for the transportation bottleneck. Proposed pipelines, like the Keystone XL, face opposition from environmental groups, and another proposal for a pipeline from Cushing to Houston died for lack of shipper interest.

The pipeline shortage can’t last. Moving crude by truck and rail is more expensive and far more likely to result in a massive spill than is pipeline transportation.

Transportation problems aside, the Bakken is booming now and is likely to continue growing for years.

Paul Ausick

Another deposit off to the northeast was known as the Haynesville shale, most of which is located in northwestern Louisiana with related deposits into southwestern Arkansas and east Texas. As exploration developed in the Haynesville shale, the estimated size of the resource was calculated at more than 250 trillion cubic feet of natural gas. That’s more than enough to supply the entire US consumption of natural gas for 10 years at current rates. The Haynesville shale is believed to be the largest natural gas reservoir in North America.

Drilling began in the Haynesville shale in about 2008 and the area is now dotted with wells drilled by more than two dozen companies. The following list names the 15 largest publicly traded companies by their net acreage holdings in the Haynesville shale as reported on their 2009 annual reports. Net acreage is equal to wholly-owned leases plus participation shares in jointly held leases.

Chesapeake Energy Corp. (NYSE: CHK) – 514,425 net acres
EnCana Corp. (NYSE: ECA) – 429,000 net acres
EOG Resources, Inc. (NYSE: EOG) – approximately 370,000 net acres
Petrohawk Energy Corp. (NYSE: HK) – 360,000 net acres
Forest Oil Corp. (NYSE: FST) – 250,098 net acres
Exxon Mobil Corp. (NYSE: XOM) – 166,000 net acres
EXCO Resources Inc. (NYSE: XCO) – 155,945 net acres
Plains Exploration & Production Co. (NYSE: PXP) – 111,000 net acres
Goodrich Petroleum Corp. (NYSE: GDP) – 84,859 net acres
Comstock Resources Inc. (NYSE: CRK) – 72,638 net acres
St. Mary Land & Exploration Co. (NYSE: SM) – approximately 41,000 acres
El Paso Corp. (NYSE: EP) – approximately 40,000 net acres
Continental Resources Inc. (NYSE: CLR) – 24,200 net acres
Cabot Oil & Gas Corp. (NYSE: COG) – 5,852 net acres

Plains also owns 20% of Chesapeake’s interest in the Haynesville shale. Exxon got its share of the play with its purchase last year of XTO Energy.

Three pipeline companies also have extensive operations in the Haynesville play. Kinder Morgan Energy Partners, L.P. (NYSE: KMP) owns a 50% share of a joint venture with PetroHawk, which owns and operates a pipeline and gathering system that will handle more than 800 million cubic feet/day by the end of 2010. Energy Transfer Partners L.P. (NYSE: ETP) is completing the Tiger Pipeline, a 175-mile, 42-inch interstate pipeline that will interconnect with other interstate pipelines to haul the gas to the east and northeast US. DCP Midstream Partners LP (NYSE: DPM) owns and operates some 4,660 miles of gathering and transport pipeline in the Haynesville play.

Oil field services companies also participate by providing the high pressure pumping systems and fluids that break up the shales and allow the gas to flow to the surface. Halliburton Co. (NYSE: HAL), Schlumberger Ltd. (NYSE: SLB), and Baker Hughes Inc. (NYSE: BHI) are among the players here.

The fracturing techniques and the fluids used to force the cracking have come under some scrutiny. The services companies have long held that their fluid formulas are proprietary, and they have refused to give up the exact formulas for the fluids. Some localities and environmental groups are trying to force the companies to release the formulas in order to determine if the chemicals are making their way into local drinking water supplies.

General Electric Co. (NYSE: GE) has recently introduced a new mobile fracking solution in what appears to be a giant opportunity in what the company called “energy efficient, fully transportable, cost effective and that it will enable onsite frac water recycling.”

Haynesville and other natural gas regions have been highlighted in many documentaries and many articles of late.  Some are favorable, some are very critical.  T. Boone Pickens and others are also touting natural gas as the bridge fuel that can get America off of foreign energy dependence.  This is work in progress with an unfinished outcome.  There are billions upon billions of dollars at stake.

Paul Ausick

Cramer also called the deal announced today where Chesapeake Energy Corporation (NYSE: CHK) where Total SA (NYSE: TOT) will pay $2.25 billion for a 25% stake in Chesapeake’s Texas Barnett Shale.  Cramer believes this is no surprise after the recently announced deal for XTO Energy (NYSE: XTO) by Exxon Mobil Corp. (NYSE: XOM).  Other natural gas and crude E&P players Cramer touted were Devon Energy Corporation (NYSE: DVN), Southwestern Energy Co. (NYSE: SWN), Apache Corp. (NYSE: APA), Continental Resources Inc. (NYSE: CLR), and Range Resources Corp. (NYSE: RRC).  Cramer even said he still likes Linn Energy, LLC (NASDAQ: LINE) except it is up 70% and probably shouldn’t be chased.  On the integrated oil players, Cramer noted Chevron Corp. (NYSE: CVX) and Marathon Oil Corporation (NYSE: MRO) were the stocks he briefly noted.

Cramer featured a speculative stock pick for making engines that run on natural gas and alternative energies is Westport Innovations Inc. (NASDAQ: WPRT). The company lost money and is partnership-dependent, funding investments and may need to raise capital.  But the CEO, David Demers said “We need a new fuel” and the company has very deep partnerships with Cummins Inc. (NYSE: CMI) and with Volvo.  Westport makes engines for buses, class-A trucks, garbage trucks and more.  Cramer said he’d stick with this one as a fair trade, but still maintains that it is a speculative stock.

Clean Energy Fuels Corp. (NASDAQ: CLNE) was briefly mentioned as the stock play for natural gas fuel stations.  This was not mentioned for very long, but this is the T. Boone Pickens play for powering trucks on compressed natural gas.

On the natural gas plays, Cramer noted how natural gas needs more lobbying, is 30% cleaner than oil, and is 40% cleaner than coal.  He also noted how there is already 100 years worth of natural gas power already in the ground.

We have been checking the calls of many pundits for 2010 stock picking, and not just in oil and gas.  This weekend we ran a pick list covering every major financial site’s stock picks for 2010.  We have also featured the best of the DJIA 30 stocks with the most implied analyst upside for 2010.

I would like to personally invite you to join in with the thousands of readers on our free daily email distribution list from 24/7 Wall St. to hear about ongoing day trader and options trader alerts, analyst upgrades and downgrades, stock and market rumors, Buffett and guru investor news, M&A and IPOs, and more.

Jon C. Ogg
January 4, 2010

Rf Microdevices (RFMD) Cuts guidance sharply. Falls to $.74 from 52-week high of $6.

Berry Petroleum (BRY) Hit by brokerage downgrade. Sells down to $6.50 from 52-week high of $62.15.

Continental Resources (CLR) Crude oil industry supplier in falling market. Dips to $13.01 from 52-week high of $83.81.

AES (AES) Company being accused of fraud. Down to $5.80 from 52-week high of $22.54.

Douglas A. McIntyre