When I last wrote about Norstra Energy (NORX) several weeks ago, this under-the-radar OTC play was gearing up to survey its property holdings located in the oil-rich Bakken Shale region of the north-central United States. At the time, NORX shares were trading in the low $0.50 cent range, knocking on the door of new 52-week highs. Since then, based on several new developments related to the company’s Bakken Shale push, market participants have bid shares up to another 52-week top of $0.76, just above where they currently reside.

Before getting into the specifics of what seems to be driving NORX’s price north, let me briefly refresh your memory about the company. At the beginning of April, Norstra announced that it had entered into a farm-out agreement with Summit West Oil, LLC. for the South Sun River Bakken Prospect, a 10,000 acre tract, with most leases extending for 10 years.

Under the terms of the agreement, Norstra is providing $200,000 for short term working capital with the goal of completing a first well into the Bakken Oil Formation by December 31, 2013. After that, the company will finish a minimum of two more wells by the end of 2014. If Norstra completes the first three wells on target, it will retain a 100% working interest in the entire farm out acreage.  If the company doesn’t complete all three wells by the end of 2014, it will only retain interests in the completed wells.

One week after I profiled Norstra in mid-April, the company announced that its management and technical team had met with its South Sun River Project operator to review current operations and establish detailed guidelines for a planned drilling program. Norstra currently has over 14 miles of seismic lines ordered from QEP Resources and PacSeis. It is expected that the reprocessed seismic data will be in place at some point in May or early June. Once the review of the seismic lines is complete, the company’s geophysical consultant will reinterpret the data, prepare a geophysical presentation to management and suggest the first drill locations.

Significantly, Norstra also announced that preliminary review of the seismic suggests an abundance of thrust sheets in the area. As a result, Norstra requested additional acreage from Summit West Oil where the blocks have been noted from the preliminary review, and Summit West agreed to add 2 full sections (1,280 acres) to the project based on the same terms as the original Farmout Agreement. This brings the total prospect size to over 11,300 acres.

“Adding the additional acreage at this point is a very important step for Norstra to ensure that we give the company and our investors the best possible opportunity to drill the first wells on our lands,” said Glenn Landry, Norstra’s CEO. “We were always planning to increase our land position over time, and after reviewing the first technical data during the operational meetings, we decided to accelerate that process. Everybody is looking forward to getting the surface casing set for the first test.”

Last week, more good news came from an unexpected source—the U.S. Geological Survey (USGS). The USGS announced that they were doubling the reserve estimate for the Bakken and Three Forks Formation in Montana, North- and South Dakota. The USGS stated that the formations could contain an “estimated 7.4 billion barrels of undiscovered, technically recoverable oil.” That’s double the original 2008 estimate of 3.65 billion barrels. The USGS also considers Bakken and Three Forks to be the largest continuous oil formations in the continental United States. This is the same oil formation that Norstra is targeting on their lease holdings.

In fact, several geologists have commented that the USGS reserve estimate numbers are probably conservative. John Harju, associate director for research with the Energy and Environmental Research Center at the University of North Dakota, said he views the USGS figure as the lower limit of the amount of oil that will be recoverable from the Williston Basin. Dr. Don Van Nieuwenhuise, the University of Houston’s geosciences department, said the USGS numbers are conservative and based on looking at “sweet spots” within the formation. “

Adding fuel to the fire, Continental Resources, the largest leaseholder in the Bakken region, believes the USGS estimate to be quite modest. “The USGS generally is very conservative in their estimates,” Harold Hamm, Chairman and CEO of Continental. In 2010, the company estimated that the Bakken field contains roughly 24 billion barrels of technically recoverable oil—about 3x the new USGS figure— out of 577 billion barrels of total oil in place. In 2012, Continental boosted its total oil estimate by 56 percent, to 903 BBO, but has yet to revise its recoverable estimates.

These latest developments related to Norstra’s Bakken claims have been greeted by market participants with enthusiasm. In very much the same way NORX shares were grinding their way higher in April, they have continued to uptrend on solid volume. During 21 of the last 26 trading sessions, volume has exceeded the 600,000 share level—quite notable for a relatively unknown over-the-counter issue. Equally significant from a trading trend perspective, shares have lifted about 15% during the one-month period stretching from April 15 – May 17. The rise has been relatively steady, punctuated by one significant pull back to $0.66, but the uptrend resumed from there.

As I noted in my first story, although Norstra is still in its very early stages of development, the company is prospecting in an oil-rice with proven reserves only a short distance from where it will drill its first well, and where several large multinational energy companies are already in active production. In April NORX defied a significant fall in oil prices and continued to challenge its then 52-week top of $0.57. If good news continues to flow from the company as it pursues the oil riches of the Bakken Shale, and the price of crude continues to hover within striking distance of the $100 per barrel mark, NORX’s current share price could continue to capture higher all-time highs.

Good luck with this and all of your trades!

Warren Gates, Senior Analyst, Oakshire Financial