Great news: the miserable mismatch between the supply of and demand for crude is now history. From here on out, supply, demand and price should increase gradually for a period of years.

At least that’s what Harold Hamm, the CEO of Continental Resources (NYSE: CLR), said three weeks ago.

You may remember Hamm: fracking pioneer, friend of the president-elect, reputed candidate for energy secretary in the new administration.

He’s also the guy who, two years ago, with oil trading in the mid-80s, said it would rebound to $90 soon, after selling all of his company’s hedges. That prediction didn’t go so well: Bloomberg later estimated it cost Continental a cool billion.

That certainly doesn’t mean Hamm is going to end up with another egg on his face this time. It does suggest that no one should bet the farm to the contrary.

Supply and demand are in fact much better matched than they were two years ago, as you’d expect after a protracted slump that discounted crude by more than 75% from peak to nadir.

The Saudis’ change of heart in pushing for an OPEC output cut is new as well, with a formal accord expected at OPEC’s meeting on Nov. 30. Even if a deal is finalized, as seems likely, it will confront widespread skepticism about the likely cheating on the new quotas and growth in non-OPEC supply.

But this skepticism in the face of inventory draws could also serve as fuel for a rally. And whether or not we get one in the final month of 2016 we’re on record forecasting higher oil prices next year, especially given the potential for escalating Mideast conflict.

Many of the stocks we already recommend would benefit, from oil major Chevron (NYSE: CVX) and shale champion EOG (NYSE: EOG) to pipeline operators like Plains All American (NYSE: PAA) and Energy Transfer Equity (NYSE: ETE).

But we’d like to add some crude exposure here, and are willing to take on more risk in order to do so, within reason. The shale drillers we’ve drafted for this mission are leveraged to higher oil prices but have the staying power to persevere should crude stay cheap.

They were not chosen on the basis of their 2018 production projections, EBITDA multiples or any other pecking order implying unwarranted mathematical precision. What matters for our mercenary purposes is that the companies are in the right shale basins and managed by credible executives selling good stories to receptive investors. You can make energy investing more complicated than that, but this is not a market that will reward you for it.

Continental STACKs the Deck

Let’s start with Continental. Like the most of the leading shale drillers it has made it through this downturn thanks to reduced costs and constantly improving drilling technology. The share price got battered but financing hasn’t been a problem and its ambitions remain largely intact.

Although the 19 rigs the company is now running are a far cry from its 50 two years ago, they now constitute the largest corporate drilling force on land in North America. Third-quarter output was down  9% from a year earlier almost entirely as a result of the drilling slowdown and legacy well declines in North Dakota’s Bakken formation.

But Continental will generate positive cash flow for the year even without the proceeds of recent peripheral divestitures. And the company should see more surplus cash next year as it holds its rig fleet steady, continues to improve drilling techniques and lucratively shrinks the backlog of 220 drilled but uncompleted wells, most of them in the Bakken.

While North Dakota should still account for nearly half of next year’s production, most of Continental’s rigs will be tunneling under Oklahoma, where the company is aggressively developing two shale plays that have become more profitable to drill from scratch.

Source: Continental Resources

The latest hot spot is the so-called STACK, for Sooner Trend Anadarko, Canadian and Kingfisher (counties) in southeast Oklahoma. Continental is most enthusiastic about drilling the Meramec shale in STACK’s over-pressured oil window, which is so far delivering rates of return above 100% — meaning it takes less than a year to recoup an investment in one of its wells. Continental is also exploiting the Woodford shale within STACK in a joint venture with a South Korean partner that’s generating rates of return near 80% at current natural gas prices.

 Oil company return projections can be notoriously misleading, but STACK’s stacked ones suggest its superiority to the Bakken (a 40% rate of return profile with crude at $50 per barrel, according to Continental) as well as to the company’s assets in SCOOP (South Central Oklahoma Oil Province, with a reported 50% rate of return).

Continental won’t release its 2017 budget until early next year but has said it plans to invest within  operating cash flow. Even so, completions of previously drilled wells could lift annual production 10% or more. The company still hasn’t begun rebuilding its hedge book.  CLR is returning to the Aggressive Portfolio with a buy limit of $60.

Exciting Times for Whiting, WPX  

Continental has made us regret dropping it in early February, even though the share price went much lower within three weeks. In contrast, getting rid of Whiting Petroleum (NYSE: WLL) in April 2015 proved much smarter, as the stock has since declined 71%.

But Whiting, like Continental and the other shale survivors, has in the meantime seen its costs shrink and well performance improve. It’s also meaningfully deleveraged the balance sheet by exchanging some of the debt while it was distressed for convertible equity.

Whiting remains almost entirely dependent on the Williston Basin that includes the Bakken, and which accounted for 88% of its recent output. Whiting’s large leasehold covering many of the basin’s sweet spots holds out the promise of broadly applicable 30-40% rates of return at the current oil price, and more using the particularly heavy concentrations of fracking sand responsible for many of the region’s biggest recent gushers.

Source: Whiting Petroleum

Third quarter output was higher than forecast, at a lower expense than expected. Production was still down a hefty 25% year-over-year.

The company has now been cash flow positive for six months and expects to be able to internally finance all of its investments next year while delivering output gains of 10% or more. Half of next year’s output has been hedged at roughly the current oil price, but Whiting’s share price should prove as sensitive to oil prices than Continental’s given its smaller size and the Bakken’s lower margins relative to Continental’s Oklahoma turf. We’re adding WLL to the Aggressive Portfolio; buy below $12.

WPX Energy (NYSE: WPX), added to the Aggressive Portfolio two weeks ago, is riskier than either CLR or WLL, and even more leveraged to oil prices. In the last 18 months WPX has transformed itself from a struggling natural gas producer with some crude assets into an oil growth story. Key to this was its acquisition in mid-2015 of a privately-held Permian Basin producer for $2.8 billion. WPX, which is led by Continental’s former operations chief, is still delineating its resource in the Permian even as it pushes ahead with a big jump in production.

It’s planning to run eight rigs, including five in the Permian, in 2017 after operating just three across its entire asset base for much of the past year. The company expects to increase its oil output 25% next year and 50% in 2018. Although WPX does not expect to become cash flow positive until 2018, it expects to cover its capital spending needs with of cash on hand and inflows from operations. The Permian is clearly key to WPX’s growth plans, but for the moment it accounts for roughly 40% of the output, on par with the Bakken. The gassy San Juan basin accounts for the rest. The Aggressive portfolio pick is a buy below $15.