The analyst has cut his ratings on three firms this morning: Carrizo Oil & Gas Inc. (NASDAQ: CRZO), Kodiak Oil & Gas Corp. (NYSE: KOG) and Whiting Petroleum Corp. (NYSE: WLL). And each cut came for a different reason.

Carrizo was cut from Neutral to Underperform because the firm’s leverage is too high to be overcome in terms of creating long-term value. The current price of the stock is around $22, and Credit Suisse has lowered its price target on the shares to $20. The consensus target is slightly more than $30, and today’s change is lower than the bottom of the range from 16 brokers.

Kodiak was cut from Outperform to Neutral, even though Credit Suisse thinks the firm is well-positioned to create long-term value for shareholders. The stock’s share price is being propped up by the company’s frequent mention as a takeover target. The price target for Kodiak has been lowered from $12 to $10, and the current price is about $9.30. The consensus target price is around $11.30 from 18 brokers.

Whiting was also cut from Outperform to Neutral on the basis of “the exhaustion of the company’s high-return inventory in Sanish [in the Bakken play] and future growth being driven by projects with diminishing returns.” Credit Suisse cut its target price from $55 to $52, well below the consensus target price of around $59.40 from 33 brokers.

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

Anadarko Petroleum Corporation (NYSE: APC) Riased target to $86 from $74 at Credit Suisse.
Apache Corporation (NYSE: APA) Started as Outperform at Credit Suisse.
ITT Corporation (NYSE: ITT) Raised targets and estimates at BofA/ML.
KEMET Corp. (NYSE: KEM) Started as BUy at KeyBanc.
Penn National Gaming Inc. (NASDAQ: PENN) Maintained as “top operator pick” with raised estimates at Credit Suisse.
PG&E Corp. (NYSE: PCG) Maintained Buy with $56 target at Argus.
Sealed Air Corporation (NYSE: SEE) Started as Neutral at Credit Suisse.
Time Warner Cable Inc. (NYSE: TWC) Reiterated BUY and raised target to $75 at Argus.
Whiting Petroleum Corp. (NYSE: WLL) Reiterated Outperform and raised targets and estimates at Credit Suisse.

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JON C. OGG

CommScope (CTV) Raised to Outperform at Baird.
Dr. Pepper Snapple (DPS) Raised to Buy at Deutsche Bank.
Majesco Entertainment (COOL) Raised to Buy at Needham.
Pepsi Bottling (PBG) Raised to Buy at Deutsche Bank.
TRW Automotive (TRW) Raised to Neutral from Underweight at JPMorgan.
Whiting Petroleum (WLL) Started as Overweight at Thomas Weisel.

JON C. OGG

Merrill Lynch & Co. is the book-running manager, and they weregranted a 30-day overallotment option to purchase an additional 1.2million shares.

Whiting sees the net proceeds at roughly $222.2 million afterdiscounts, commissions, and expenses.  The company intends totemporarily reduce amounts outstanding under its credit facility and toincrease its 2009 base capital budget to develop incrementalopportunities it has identified in the Northern and Central Rockies.But the company can also either further develop these incrementalprojects or it can expand previously announced projects under the 2009base capital budget.

This looks like it is at no discount on the surface since it closed at$29.14, but this was anticipated to be coming at the end of this weekor the start of next.  Shares closed down 7% at $29.14 today, andshares were at $36.00 on Monday before the intent to offer the stockwas announced.

Jon C. Ogg
January 29, 2009

• BMC Software (NYSE: BMC) Started as Neutral at UBS.
• Cinemark (NYSE: CNK) cut to equal-weight at Morgan Stanley.
• Citrix Systems (NASDAQ: CTXS) Cut to Market Perform from Outperform at FBR.
• CME Group (NYSE: CME) Raised to Buy from Hold at Citigroup.
• CTC Media (NASDAQ: CTCM) started as Overweight at Lehman Brothers.
• Double Hull Tankers (NYSE: DHT) raised to Neutral at JPMorgan.
• Elizabeth Arden (NASDAQ: RDEN) raised to Outperform at Oppenheimer.
• Hovnanian Enterprises (NYSE: HOV) Raised to Neutral from Sell at UBS.
• Tempur-Pedic (NYSE: TPX) cut to Perform at Oppenheimer.
• Whiting Petroleum (NYSE: WLL) started as Outperform at Wachovia.

Jon C. Ogg
June 17, 2008

The underlying properties include interests in approximately 3,000 producing wells located in 173 fields in 14 states. As of September 30, 2007, the total proved reserves attributable to the underlying properties, as estimated in the reserve report, were 13.18 MMBOE with a pre-tax PV10% value of $243.5 million. All of these reserves were classified as proved developed producing reserves. For the month of September 2007, the average daily net production from these properties was approximately 4,508 BOE/d or 4,057 BOE/d attributable to the net profits interest and were approximately 55% oil and natural gas liquids and 45% natural gas.

If you wish to join our open email distribution list we often provide more detailed IPO and spin-off coverage.  This trust from Whiting and other pending MLP and Trust spin-offs in the oil and gas sector are under review for our subscriber-based "Special Situation Investing Newsletter" where we cover buyouts, spin-offs, back-door plays into IPO’s, reorganizations, and more.

Jon C. Ogg
November 21, 2007