Brigham Exploration Company (BEXP)

At this point, oil and gas exploration companies are one of my favorite sector plays.
Demand has declined several percent(1) and may well decline some more over the next year or two. However, the supply is also adjusting to the new environment and oil prices may have already somewhat stabilized. I realize that spot prices may take another dip this summer as economic "green shoots" suddenly wither and die, but I also note that the inflation-adjusted average price for oil for the last 30 years is $43.15 per BP's data(2), during which time we have under-invested in bringing new supplies online.
After an approximately 75% decline in the recent peak oil and gas spot prices and an 88% decline in BEXP share price, I'm now comfortable that I am getting in at a good level. I won't believe that the fundamentals are impaired in this industry until I see competitive energy sources appear or the industrial revolution coming to an end. While the current economic morass may continue for quite some time, demand will eventually resume its upward bias.
If I'm looking at Brigham's numbers on their website correctly, their gross profit margins are still OK at the current revenue levels and production has been growing 5% year over year. They do seem to do a lot of hedging. A 2008 non-cash charge of $237M (3), based on a reevaluation of the value of their holdings, using current oil/gas prices, is not likely to come back on the books anytime soon. However, on the plus side, they now have a $43M deferred income tax credit and some of their properties are undervalued since new technologies that they are using now actually make those properties worth more than the listed book value.
So, $5.15 per share book value is gone (poof!) and $2.60 remains (all tangible). At an entry price of $2.10, I am buying at 80% of the new book value, with profits I can not estimate without plugging in some estimate of future oil/gas prices. I note that CEO Ben Brigham was selling some of his 1.1 million shares last Oct. at around $7 per share and, more recently, has been buying them back in the $1 - $2 range (clever man).

(1) http://tinyurl.com/dle9q4
(2) http://tinyurl.com/dgvgcv
(3) http://tinyurl.com/cvlcbw