Hot Stocks: Signature Exploration (SXLP.OB)

We hit an absolute homerun on Brigham Exploration (BEXP) in 2009 (bought at $2.15, current $14.00) and we are looking to better that performance with one of my #1 oil and gas pick for 2010. Signature Exploration News (SXLP.OB) is getting my full attention for very good reasons.

I caught the attention of the Stocknod community with BEXP last year and I believe my latest oil and gas pick, Signature Exploration and Production is going to trounce them all.

In the 1970’s the major producers virtually abandoned the good ‘ole U.S.A.’s oil and gas fields for cheaper and easier to find foreign sources of supply. While they were scouring the globe an entire new breed of small oil and gas companies quietly took over our domestic oil and gas industry.

But now the majors are back and looking to re-purchase the same properties they previously abandoned. That’s why Exxon recently paid $31 billion for XTO Energy–because it’s is cheaper to buy existing properties than develop new projects.

The majors are coming back to the U.S because there’s a lot of oil and gas still here. In fact, 2/3 of the oil and gas in the U.S. fields has been left behind. There’s 337 billion barrels worth trillions of dollars ready to be recovered.

You see, by some estimates, 90% of the land-based wells in the U.S. are old “stripper” wells with huge recoverable reserves. Today’s prices and cost-effective recovery technologies makes them valuable targets once again.

That’s great news for aggressive exploration companies like Signature that are rapidly acquiring and developing promising oil and gas properties at prices below the cost of developing new fields in remote and inhospitable regions of the world.

I spend a lot of time researching for undervalued companies and I believe Signature Exploration and Production is grossly undervalued. Here’s why…

Signature is acquiring oil and gas leases and working interests in Texas, Kansas, New Mexico and Illinois. They have interests in more than 2,603 acres with aggressive plans to drill new wells and ramp up production.

Tiny Signature Exploration and Production has less than 10 million shares outstanding, so its market capitalization is about $6.5 million. It is being valued in the market at less than the average price of four of XTO’s wells.

Although Signature is just getting started with their drilling program I believe they have excellent prospects to bring in several new wells into production this year, which could easily double, or triple the company’s value.

Tertiary recovery techniques will only continue to improve and the cliche of “too many straws in this soda pop” is about to get brand new straws that will find reserves in fields once considered depleted. Look for domestic production to increase across the board with Signature Exploration SXLP stock prices leading the charge in 2010.