PetroBakken Energy Ltd’s (TSX: PBN, OTC: PBKEF) problems may be easier to resolve than those of most rivals. Much of a production disappointment in the first half of 2011, for example, was due to exceptionally wet weather in 2010, which interfered with drilling conditions. The company also experienced some growing pains integrating some CAD1 billion in acquisitions, which management appears to have resolved. The biggest worry many seem to have is that PetroBakken’s technical capabilities are questionable. That has long-run implications that no one-off weather or short-term organizational dynamics issues can cover up. But that’s something that will only become apparent once we start to see results that can’t be blamed on weather.

The bet here is this much maligned company defies its skeptics and at last begins to produce up to the potential it promised when it initially went public roughly two years ago. If it can do that, it will hold its generous dividend and should recover much of the ground lost by its stock since its IPO. Alternatively, if oil prices do bounce as we think likely, we should have a winner even if the company continues to disappoint. This is a high risk/high reward play on energy, so treat it accordingly.

PetroBakken Energy is a buy up to CAD9.60 on the Toronto Stock Exchange, up to USD9.40 on the US over-the-counter market.

For more on the story, see this month’s edition of Big Yield Hunting.