Triangle Petroleum

A small-cap exploration and production company based in Denver, Colorado, epitomizes just how rewarding and transformational the shale boom in the United States has been.

Triangle Petroleum (NYSE: TPLM), a pure play Bakken Shale producer, has grown from a sub-$100 million company with only 20 employees to billion dollar organization with almost 400 employees and three business units in the past three years. Now, management believes the foundation has been set for even greater growth opportunities.

After slowly working its way up the industry ranks through a conservative growth approach, timely acquisitions in the Bakken Shale and the milestone transition to an operating company, Triangle has successfully positioned itself to embark on an illustrious year in 2014.

"Public investors who haven't looked at us in a few years still see us as a non-operator," said Jonathan Samuels, president and CEO of Triangle Petroleum. "But now they can see that's no longer the case." Roughly half of Triangle's 95,000 acres are in its core Bakken area – 65% of which is now 100% operated by Triangle Petroleum.

"It's truly a world class resource," Samuels said, and Triangle is prepared to take full advantage. Similar to the recent resurgence in the Permian Basin, Samuels believes the Bakken will be a play that will keep on giving for at least another 50 years. The use of horizontal wells, in addition to improvements in infrastructure and technology, will only propel production rates, he says.

And the company's early entry and patience has paid off. Triangle has selectively added assets over the years. Samuels recalls Triangle's weighted cost per acre averages only between $3,000 and $4,000.

But setting the stage for growth has not come without some challenges. The notoriously barren landscape and its lack of infrastructure, including roads and housing, was problematic not only for Triangle, but for all producers – and Triangle took action.

To identify and capture every cost-saving and/or efficiency gain as possible, the company formed subsidiaries to support its mid-stream and service necessities. RockPile Energy Services is a wholly owned subsidiary of TPLM providing oilfield services to its parent company. Additionally, TPLM owns a 30% stake in Caliber Midstream Partners which provides transportation, disposal and gathering services.

"We have three different engines to drive our growth, so we don't struggle if one is having a down year," said Samuels. "Our E&P hit its stride this year, the services side hit mid-year and our midstream (Caliber) hasn't produced returns just yet." Triangle invested $30 million in Caliber in 2013, and owns 30% of the project as part of a joint venture with First Reserve Energy. The Caliber system, expanded in September 2013, will service all Triangle-operated acreage in the Bakken, and is expected to be in-service on or before June 30 2014. If the development of RockPile Energy Services is any indication, Caliber will likely be in good hands.

RockPile is focused on providing best in class pressure pumping and has developed a solid reputation in the region with its workforce of North Dakota natives. RockPile completes all of Triangle's wells as well as those for other key players in the basin and has seen substantial growth since inception. "We're not the first company to own a service business," Samuels said, "however; we're the first company where the service business can be half our current market cap even though we invested only 2% of our market cap in it."

Given Triangle's considerable production and reserve growth one might think that the company would have layered on significant forms of debt. However, that's not the case at all. In fact, Triangle has zero net debt. What's more, an equity raise and redetermination of its borrowing base has been able to offset its acquisition costs.

"Balance sheet strength is one of the key tenants of a small-cap energy company," said Samuels. "We have an aggressive growth plans like a lot of folks, but we want to be able to finance them."

Careful planning and successful execution positioned Triangle where they are today and the company believes the best is still ahead.