Several years ago, when I was looking for exposure to rising oil prices, I spent quite a bit of time searching for bargains in the energy sector. After examining the various investment options available, I developed a game plan for the next couple of decades.

#-ad_banner-#I call it my unconventional plan, because it involves investing in oil producers focused almost exclusively on unconventional (horizontal) production.

The plan looks like this:

1.) Find unconventional producers that appear reasonably (or cheaply) valued based on current reserves and production.

2.) Focus on those that have the biggest land positions in these horizontal oil plays relative to their enterprise value.

3.) Sit back and wait as the technology and techniques being used by these unconventional producers continue to evolve. Horizontal drilling with multi-stage fracturing is still in its infancy, and I expect future improvements on current techniques will allow for a lot more oil to be recovered than anyone expects.

4.) Enjoy the added benefit of rising oil prices making all of the oil that these companies sit on top of more valuable.

Crescent Point Energy (NYSE: CPG) is the premier horizontal oil producer in Canada. I’ve never owned a significant amount of CPG because it has always been one of the more richly valued Canadian producers.

But I’m starting to think this rich valuation might be merited — because Crescent Point has a lot of growth ahead of it.

Last week, the company announced it had discovered a new oil play in southern Saskatchewan near the U.S. border.

Crescent Point calls this play (or formation) the Torquay, but it is actually an extension of the Three Forks play that is found underneath the Bakken in North Dakota.

Over the past year Crescent Point has accumulated 220 net sections (about 141,000 acres) of land in the play. On that land, Crescent Point estimates it can drill at least 400 wells.

And more importantly, those wells appear to be very profitable, with rates of return ranging from over 90% to almost 300% depending on the location of the well.

A company can make a lot of money drilling wells that generate those kinds of returns.

This is another nice asset for a company that already has built a horizontal land portfolio that holds a massive 18 billion barrels of oil in place (OOIP).

Source: Crescent Point

It is the big amount of oil in place that is what I think is so intriguing about these unconventional producers. These companies have huge leverage to technology and technique improvements that could create step changes in value for shareholders.

Let me show you what I mean using Crescent Point as an example.

Crescent Point’s third-party reserve auditors have allowed the company to book 664 million barrels of proved and probable reserves (barrels of oil with a reasonable assurance of being economically produced). Additionally, Crescent Point has already produced 522 million barrels. Combined that amounts to 6.5% of the oil in the ground on Crescent Point’s land.

With each 1% increase in the amount of oil Crescent Point can recover, the company is going to be able to increase reserves by 180 million barrels. To double its current reserves Crescent Point would only need to increase this recovery factor by 3.6%.

Doubling reserves would obviously create significant value for shareholders. I think there is potential for a lot more than doubling of reserves over time just from the land that Crescent Point already controls.

There are various ways that recovery factors are going to increase over time. These include infill drilling, better fracturing techniques, longer horizontal wells, water and natural gas flooding, and who knows what else.

The important thing for an oil producer is to have as much acreage in these plays as possible so that it can reap the rewards of these improving recoveries in the coming decades.

I expect it to be easy for Crescent Point shareholders to sit back and enjoy the ride in the coming years because the company pays a 6.3% dividend that is very secure.

And if the company keeps adding to its massive land base with more announcements like the recent addition of 400 Torquay/Three Forks drilling locations then things will work out even better.

Risks to Consider: The main risk to Crescent Point is the price of oil. This is an oil producer with very little natural gas production. If oil collapses then Crescent Point like all oil producers will suffer.

Action to Take –> This is a long-term buy and hold if you believe oil prices aren’t going to collapse. This is a top management team that is going to continue to expand production and pay a very sizable dividend. Crescent Point isn’t going to double overnight, but with a 6.3% yield, it doesn’t take much capital appreciation to create a market-beating return.

P.S. Speaking of new oil plays, my colleague Dave Forest might have discovered the world’s first $1 trillion boomtown situated in the center of massive new oil and gas deposits. Several oil and resource mining companies (including one that’s up 1,500% in the past year) are poised to make billions from this under-the-radar hotspot. To get access to some of the stock names and ticker symbols Dave’s recommending, follow this link.