Energy Prospectus

Oasis Petroleum (OAS): An updated Net Income & Cash Flow Forecast model has been posted under the Sweet 16 Tab.

In December, OAS sold 7 million shares of common stock at just over $45/share. The stock is now trading below that level. It hit an all-time high of $57.33 in mid-October, primarily when the whole sector ran up with oil prices during the "Obama War Talk" (Syria) driven crude oil price spike. They also announced several senior management changes in December.

So......I decided to take a very critical look at my forecast model today. < This is why you pay me the "Big Bucks".

Simply put, this stock is grossly over-sold. OAS is going to report a significant increase in production from 33,064 boepd in the 3rd quarter to approximately 43,000 boepd in Q4. Their exit rate should be over 45,000 boepd (~90% crude oil). They have increased production more than 50% Y/Y and I am expecting them to do it again in 2014.

The stock offering was not that dilutive (93 million shares to 100 million) and the proceeds were used to shore up the balance sheet. Based on my forecast, they will generate over $1.1 billion in operating cash flows this year. They have more than enough cash on hand and operating cash flows to accelerate their Bakken development program. They have done a great job reducing their drilling and completion costs as they move to more pad development drilling. They will be drilling at least 8 wells per pad and in some areas are going to test 24 wells per pad. They have a HUGE inventory of low risk development drilling locations in the Williston Basin Bakken + Three Forks play.

In my opinion, OAS is a "Screaming Buy" up to $50/share. First Call's price target is $58.73, which is still a long way from my valuation of $76.00/share. OAS will have a VERY IMPRESSIVE year-end reserve report that should draw a lot of attention.

OAS is trading today at less than 4X my 2014 cash flow per share (which is just above the First Call CFPS forecast). An E&P with this much running room should be trading for AT LEAST 8X CFPS.

Dan,
how does Emerald Oil compare to the other Bakken companies in S16 and watchlist?
Thanks.

cheers - Mike

Emerald Oil is a small-cap (under $500 million market cap) that is just getting a foothold in the Williston Basin. My concern is that since they are "late to the party" they will pay a premium for leasehold and services. They will report a loss for 2013 and they are taking on a lot of debt with the deal below. We will take a look at it after they release Q4 results. - Dan

DENVER, CO -- (Marketwired) -- 01/10/14 -- Emerald Oil, Inc. (NYSE MKT: EOX) ("Emerald" or the "Company") today announced that it has entered into two separate definitive purchase and sale agreements with two unrelated sellers to acquire additional core Bakken and Three Forks producing properties and undeveloped leasehold in McKenzie and Williams Counties, North Dakota. The total purchase price for the asset packages is $74.6 million in cash. Upon closing, Emerald's total Williston Basin leasehold will increase to approximately 85,000 net acres.

Acquisition of Williston Basin Properties
•Approximately 20,800 net acres, including approximately 19,500 net acres highly contiguous to Emerald's Low Rider operating area in McKenzie County, North Dakota;
•Approximately 350 BOE/D of estimated current net production;
•19 operated Drilling Spacing Units (DSUs);17 DSUs in Low Rider and 2 DSUs in Easy Rider;
•Approximately 62% of acreage is held by production and;
•Upon closing, Emerald's total Williston Basin leasehold will increase to approximately 85,000 net acres (75% operated).

Financing of the Transactions

The Company will fund approximately 50% of the acquisition costs through borrowings under its undrawn revolving credit facility and the remainder utilizing cash on hand. Emerald ended the year with approximately $140 million of cash and $75 million of undrawn borrowing base under its revolving credit facility. Emerald is in the process of working with its bank lending group to complete the Company's semi-annual borrowing base redetermination to reflect both the Company's recent well completion activities and the reserves and production acquired in these transactions. The combined impact of Emerald's operated activity and these acquisitions are expected to result in a significant increase in the Company's borrowing base at the April 2014 redetermination.

Management Comments

McAndrew Rudisill, Emerald's Chief Executive Officer, said, "The two acquisitions follow Emerald's strategy of identifying and acquiring contiguous leasehold in our immediate operating areas. This additional acreage expands Emerald's presence in our Low Rider and Lewis & Clark focus areas of McKenzie County, ND where we have seen strong production growth as a result of our successful operated well program. The proposed acquisitions are immediately accretive on all per share metrics. Emerald remains well positioned to execute on our previously announced 2014 capital spending program and will be giving updated guidance upon close, which currently is scheduled for February 13, 2014. On a separate note, although the Williston Basin experienced extreme cold during December 2013, Emerald is comfortable with its previously announced Q42013 average daily production guidance of 2,300 BOE/D and exit rate of 2,400 BOE/D."

About Emerald Oil, Inc.

Emerald Oil, Inc. is an independent exploration and production operator that is focused on acquiring acreage and developing wells in the Williston Basin of North Dakota and Montana, targeting the Bakken and Three Forks shale oil formations. Emerald Oil is based in Denver, Colorado. More information about Emerald Oil can be found at www.emeraldoil.com or by calling investor relations at (303) 323-0008 x200.