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An Accidental Fortune in Oil?

Written by Keith Kohl
Posted May 22, 2018 at 8:00PM

Last week I told you there’s a fresh oil play out there right now that holds a lot of similarity to the Bakken.

That is, it’s an oil formation that had been overlooked for so long, drillers had given up any hope of turning a profit — the way the Bakken was back in the 1950s.

Now, there’s a good chance you’ve never heard of the Red Cave formation.

Don’t worry, you will soon enough.

Right now, everyone is focused on the Permian Basin.

We can’t exactly blame them, can we? After all, roughly 3.2 million barrels of oil are produced from the Permian region every day.

To ignore that would be foolish.

Sometimes, however, areas like the Permian Basin shield investors from identifying new up-and-coming plays.

The Red Cave is one of them.

Located in the Texas Panhandle, the Red Cave has actually been known to oil companies for about as long as the Permian Basin. Drillers were producing natural gas out of the formation since 1919.

It was also considered a curse by those early drillers, and the Red Cave wasn’t even considered a separate field until the 1960s.

Even then, companies weren’t interested in extracting oil and gas from the formation, choosing to drill through it to tap deeper pay zones.

So there it sat, overlooked for the better part of 50 years.

Then something fortunate happened...

A private oil company, desperate to scrape any oil before packing things up, decided to use a large-scale frac on the Red Cave.

They struck pay dirt.

Thing is, somebody else was paying attention.

While everyone’s attention has been fixated on the massive activity going on in the Permian Basin, there was one tiny E&P company that was studying the Red Cave, tweaking the formula that would fully unlock accidental oil fortune.

So let me ask: When was the last time you bagged a stock that made you ten times your money?

Ripe Conditions for Your First 10-Bagger

It doesn’t happen often, but those who are able to capture that elusive 10-bagger don’t do it by chance. You see, what most investors don’t realize is that there are certain conditions that can exist that’ll help you pocket your first.

Call it a perfect storm for oil stocks, if you want — a set of three simple factors that if caught early can lead you to that monster trade that may have evaded your portfolio so far.

Look, one of the best times to buy an oil company in a new play is when:

  1. Production is just starting

  2. Initial wells are showing great results

  3. The mainstream investing public knows very little about it

Sounds simple enough, right?

Well, my readers and I saw these conditions surface in North Dakota back in 2007, before anyone in the mainstream media had even heard of the Bakken oil formation.

At the time, North Dakota was only producing a little over 100,000 barrels per day — a trivial amount compared to the 1.1 million barrels extracted on a daily basis today.

And Continental Resources hit every one of those points I just made. During the first quarter of 2007, the company was only producing around 23,000 barrels per day. Right now its output is more than 287,000 barrels per day.

Moreover, the company was posting some strong well results, and like the Bakken in general, it was nowhere on the investment herd’s radar.

It was only a matter of time before Wall Street caught on.

After bottoming in early 2009, shares of Continental surged over 1,000% in the next few years:

That’s the kind of potential we’re talking about.

Right now, we’ve uncovered a little investment gem drilling in the Red Cave that’s meeting these three criteria.

Not only did this tiny driller lock down the sweet spots in the play, but it’s also already selling its oil on the market.

And the best part is that it’s still flying under everyone’s radar.

At least, it is for now.

In a week, I’m going to tell you exactly how you can trade it.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.


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