Cress Oil, a subsidiary of The X-Change Corporation (XCHC), may have bought into a potential oil field in Montana that is part of the Bakken shale formation. Cress just made a deal to buy the mineral rights on 15,000 acres in northeastern Montana from Diverse Energy Investments LLC.
The exciting thing about this deal is that the acreage that Cress has purchased is part of the Bakken shale formation. The U.S. Geological Survey estimates that the Bakken formation and its surrounding areas could contain up to 3.65 billion barrels of oil, 1.85 trillion cubic feet of natural gas, and 148 million barrels of natural gas liquids.
Cress is planning to launch an aggressive drilling program on both the acreage it just bought and additional mineral leases it owns in central and northeastern Montana right away. The company will close on the mineral leases on Aug. 10, so it could be drilling on some of that land by this fall. The leases just purchased are located in Daniels and Roosevelt counties, which are next to the North Dakota state line.
Cress also has the money to start its drilling and fracking operations in Montana. The company recently completed a deal to get $2.8 million in equity funding from La Jolla Capital Investors. That money should cover the costs of the operations and help it get the oil and gas wells into operation.
As stated earlier, Cress is a wholly-owned subsidiary of a shell company called The X-Change Corporation (XCHC), so this deal might make The X-Change Corporation a really good penny stock play in the oil sector. X-Change shares did go up in value by 1¢, or 9.09%, on the news of this deal. If this deal works out and the company starts producing oil and gas, X-Change shares should keep going up for quite some time.
Cress Oil Makes X-Change Look Good
Cress Oil’s work in Montana indicates that X-Change has some major growth potential; it has been able to successfully purchase mineral rights in one of the world’s fastest growing oil fields. The company has demonstrated its ability to get equity financing and move quickly and aggressively to take advantage of new opportunities.
In addition to Montana, Cress Oil is looking into opportunities overseas. The most exciting of these are in Iraq, which is aggressively expanding its oil production and allowing foreign companies access to “super-giant” oil fields. A super giant oil field contains more than 5 billion barrels of oil. Iraq is selling off the right to drill and pump in five super giant oil fields, Majnoon, Rumalia, Zubair, West Qurna 1, and West Qurna 2.
Even a modest investment in Iraq could give Cress Oil the access to a huge amount of oil. Iraq has proven oil reserves of 143 billion barrels and gas reserves of 122.5 trillion cubic feet. It has been willing to let foreign firms buy into this potential bonanza in order to repair the damage done to the oil fields by decades of dictatorship and war.
Major oil companies working in Iraq include BP (BP), which is active in the Rumalia Oil Field, EniSpA (E), which is working Zubair, Occidental Petroleum (OXY), also in Zubair, and Exxon Mobile (XOM) and Royal Dutch Shell (RDS), which are developing the West Qurna 1 field. Russia’s Staoil ASA (STO) is developing West Qurna 2.
It should be noted here that there is no indication that Cress Oil has completed any oil deals in Iraq, nor are any details of any deals the company is working on listed on its website. Iraq appears on a list of countries that Cress would like to drill in at some point in the future. Other nations the company is interested in include Egypt, Turkey, and Vietnam.
Any successful oil deal in Iraq would greatly boost X-Change’s stock value because it would demonstrate that is capable of making major deals in one of the world’s top oil producers. It would also demonstrate that it is capable of making a serious deal with a foreign government.
A successful deal in Iraq could propel X-Change out of the penny stock category. Success in Iraq could give X-Change the cash it needs to make investments in the other foreign markets it is targeting. Such success could also give X-Change the ability to develop its other foreign properties. Successful expansion overseas would help Cress Oil become a major player.
Major Investors, Including Warren Buffett, are Active in the Bakken
X-Change would be a great low cost way to get involved in the Bakken formation. Two of the biggest value investors in North America, Warren Buffett and Bill Ackman, are already profiting from the Bakken formation.
Bill Ackman of Pershing Square Capital is the biggest investor in the Canadian Pacific Railway (CP). The Canadian Pacific has seen its profits increase because its tracks run right through the Bakken area. The tracks are used to haul sand, which is used in fracking the process needed to get oil and gas from the Bakken rock. On June 22, the CPsigned a deal with U.S. Silica Holdings (SLCA) to be the exclusive shipper of sand for hydraulic fracking from Silica’s Sparta mine in Wisconsin to the Bakken.
The Burlington Northern Santa Fe, or BNSF railroad, owned by Warren Buffett’s Berkshire Hathaway (BRK.A), is also in a position to profit from the Bakken because two of its main lines run through the region. In addition to hauling in sand and other materials, railroads haul much of the oil out of the region.
Buffett and Ackman have reputations as being shrewd value investors. They are investing in the Bakken because it has the potential to generate cash. Cress Oil is investing there for the same reason because the Bakken has long-term value. One of its biggest attributes is low cost transportation that is provided by two major railroads. That can enable companies like Cress to keep the costs down on drilling operations and maximize profits.
The presence of two major railroads in the region will benefit Cress Oil because it will be able to start shipping out oil and liquid natural gas products as soon as the wells start producing. It will not have to wait for the construction of pipelines, a process that can be delayed by permitting. Many producers in the Bakken are using railroads to ship out oil while they wait for pipelines to get built.
Cress Oil Posed for Growth
Cress Oil looks like it is poised for growth; the company has demonstrated that it is capable of buying potentially profitable oil leases in a proven field. It has also demonstrated that it can secure the funding necessary to finance the new activities.
If it can duplicate its success in the Bakken and other oil regions, Cress should be able to deliver long-term growth for shareholders. The company could increase its share value further by demonstrating that it is capable of difficult extraction operations, such as hydraulic fracking. Extraction in many overseas oil fields, including Russia’s Bazhenov, will require fracking.
This could give Cress the capability to take advantage of opportunities in many countries beyond those, and it has indicated it will also expand, so X-Change could be that oil growth stock you’ve been looking for.
Transparency/Disclaimer: I received $150 from a third party shareholder to write this article. I’ve done my own due diligence, but my due diligence is not a substitute for your own.