Emerald Oil, Inc. (EOXLQ)

[Timothy Smith]

The street is looking for EOX to prove its technical ability to operate wells in the Williston Basin.

How many wells will it take - five, 10 or 20? Regardless, the company is drilling and raising its production profile. The company's recent operated-well drilling results are producing above the company's estimated type curve.

This next batch of operated wells announced during its Q2'13 results will add to the company's "operated-well" credibility.

This is a story that is transitioning from undeveloped, risked acreage in a proven play, to a company with long-term development opportunities that will contribute to near-term rapid growth in production, reserves and cash flow.

There are many acceptable methodologies for valuing an E&P company. EOX is beyond early stage; however, it does enjoy an early-stage multiples.

On an enterprise value to trailing twelve months production basis, EOX is trading at $293,006 per flowing BOEPD. Referencing EOX's June 2013 presentation, on an enterprise value to Williston Basin acre basis, the company is trading at $2,730, a 67% discount to the peer average of $8,262.

KOG's $660 million acquisition of Liberty Resources 42,000 net Williston acreage was for $15,714 per undeveloped acre (without adjusting for any daily production).