Tabell’s Market Letter – January 21, 1955

f .. / Walston &- Co. MEMBERS NEW YORK STOCK EXCHAP\lGE AND OTHER LEAOING STOCI( NO COMMODITY eXCHANGES NEW YORK PHILADELPHIA LOS ANGElES SAN FRANCISCO LUGANO ISw,,,,,',,d) OFFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LETTER January 21, 1955 It is quite evident that the character of the market has changed. The straight-line advance that started early in November has apparently ended and is being replaced by a broad trading area. The outer limits of this contemplated trading shelf are not yet clear. The technical pattern that has formed over the past several weeks is not yet complete and must be watched closely. It is possible that a vulnerable pattern could be formlng for the first time since mid-1953. The formation in the industrial average and in some individual stocks has the appearance of what technicians call a head and shoulders top. This possible top has been formed by the mid-December high of approximately 400, the early January high of 412 and the recent ral,ly top of 402. The lower part of the pattern is the 385-387 area which has been the low on the last two market declines. A decisive downside penetration of this support zone would indicate a further decline to the 375-360 area. On the favorable Side, my intermediate term technical indicator registered a buy signal on Tuesday. If the upside momentum continues and the industrials push above the 402-403 level, the potentially bearish pattern would be destroyed. Therefore, it would appear that 403 and 385 are the important points to watch. Friday's close was 395.86. The above analysis applies, of course, to the'nearer term action of the market. The longer term trend of the market is still upward, but a resting period may be in order. Selected stocks should be bought regardless of the shorter term swings in the averages. There are many issues that indicate higher levels over the longer term. One such issue is reviewed below MONTANA-DAKOTA UTILITIES CO. Statistics The common stock of this com- Current Market Current Dividend Current Yield 26 1.00 3.8 pany, in my opinlon,is amost interesting growth situation based not only on the potential population increase in the territory Long Term Debt Preferred Stock Common (Shares) .40,170,328 9,941,500 1,758,644 served, but also on the company's control of substantial acreage in the Williston Basin. A good portion of this acreage is under Net Per Share,1954 1.56 – E Net Per Share,1953 95 Operating Revenue,1954 – 22 million -E Operating Revenue,1953 – 19.48 million operating agreement with Shell Oil. If sizeable oil production is developed in the future, it is probable that this portion of the company will be spun off to Market Range, 1952-1955 28 7/8 – 17 1/2 stockholders as a separate company. E – Estimated As a utility company in a growth territory, the stock should be worth its present price in the not too distant future without giving any value to its oil acreage. Montana-Dakota Utilities supplies gas and electricity to communi- ties and municipalities in Montana, North and South Dakota and vlyoming. A total population of only 375,000 is served, but the growth potential is sizeable. The area served is experiencing substantial population growth and accelerated commercial and industrial development because of the rapidly expanding oil exploration and production activities in the Willis- ton Basin. The company's electric and gas utility services extend over this entire area. The reflection of this growth potential was shown by a 12.3 increase in operating revenues in the first eleven months of 1954. Earnings for 1954 are estimated at 1.56 a share. The dividend rate was recently increased to 25 quarterly. Th,1 m ., m,mor.ndum nol to be h…. ,n ,nl,rut ,0'1 10' (onllfl,r,d or .11 of ., … oft.r or lolocit,tiOf'! of oHI to bur o. II ttl, I4Icu,lfl m,fltlon,d h.ln The 10'looi9 .n, l.cud' h', iu b. From ,n p time lr,d tobolltimUeI W,lIton , Co, I' mett., 0 or ,In., p,rtn,r 00'11, It UPOI'l ,lIlo.ml',on b.h,.,d li,bl, but l'Iof KIIMril, compl.,., 'I not qu.,.ntd ., KCW. or titl.I, .tld '1 tlet Itlletlded to 'ore,loie Itldepetldetl' 'quory -2- It is four years since the discovery of oil in the Williston Basin and it appears that actvities have settled down to careful exploration and development largely by the major oil companies. The feverish leasing activities throughout the Williston Basin have largely given way to a careful study of the area, and unlikely leases are being dropped. MontanaDakota Utilities controls, by leases or operating agreements, approximately 263,000 acres in the Williston Basin. Of this total, approximately 90,000 acres are on the Cedar Creek Anticline in Montana which has assumed a position of ever increasing importance. It now includes nine areas productive of oil. Four of these areas are on lands which Montana-Dakota is located. In addition, the company has 110,000 acres in the Bowdoin Field, Montana. Other holdings are 5,500 acres near Williston, North Dakota and 3,000 acres in Mercer County, North Dakota, and approximately 8,000 acres in Harding County, South Dakota. Only the Cedar Creek Anticline is of immediate interest although the other holdings mayor may not have a future potential. To get complete picture of the importance of the Cedar Creek Anticline, Dakota Uti I li suggest you ties issued onreaJdanauarreyp7o,rt to the 1955 by stockholders of MontanaR. M. Heskett, Chairman of the Board. This report is a very complete tabulation, with maps, showing the number of wells which have been drilled on the Cedar Creek Anticline in the area where Montana-Dakota lands are located. Italso includes in detail the various working agreements with Shell Oil. A further indication that the Cedar Creek Anticline is due for acceleration during the coming year is the fact that Shell Oil Company has recently completed and placed in operation, a 12-inch crude oil pipeline from near Glendine, on the Northern Pacific Railway, passing through the various fields. It is rumored this may eventually be tied into a pipeline extending southward into vlyoming, thus giving this portion of the basin an outlet for its crude oil. Of fur- ther interest is the fact that Shell Oil has moved some of its own drilling crews and drilling equipment into the area, including some of the most modern drilling equipment that the industry has been able to develop. The stock has built up an extremely favorable long term pattern. It has held in a broad trading range between 28 and 18 since mid-1951. An upside penetration of this area to reach 29 would indicate the probability of 45 followed by an eventual 60-65. This is, of course, a longer term projection. As a utility issue in a growth territory, the stock most likely has a value of approximately 18 to 19. Thus it appears that the stock has an upside appreciation potential of 150 as against a temporary downside risk in a very bad market of 26. Purchase is advised. EDMUND vi. TABELL WALSTON & CO.