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Is this laggard facing powerful rally?

Northern Oil & Gas appears well leveraged to the energy renaissance underway in North America. So how come shares are down almost 9% year to date?

Considering Northern Oil & Gas is a pure play on North Dakota's Bakken shale, shouldn't it have rallied in lock-step with other Bakken plays such as Continental Resources which is up 6% ytd or EOG Resources which is 12% higher over the same period?

Jim Cramer thinks part of the underperformance may stem from the business model; he doesn't think the Street fully understands it.




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"Northern Oil & Gas controls 187,000 acres across North Dakota and Montana, and they've participated in over 2,000 wells since 2006, but they don't do any of the drilling themselves, "Cramer said.

"Instead they put up capital to take a minority interest in wells drilled by other companies, like EOG and Continental Resources. If NOG pays for 10% of the cost of the well, they then get 10% of the production."

The underperformance may stem from fears that the company doesn't have control over drilling activity.

However, Northern Oil & Gas CEO Mike Reger tells Cramer that "as long as the Bakken is being developed our acreage is being developed. Our 187,000 acres are in the core of the play."

"The company does have leasehold interests in a fifth of all the wells that have been permitted and drilled in North Dakota since 2006," Cramer added.

And Reger says the company may have more financial flexibility than peers. "As a non-operator, Northern doesn't share the same long-term contracts so we have an ability to be more nimble on Capex."

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All told, has the stock been unfairly held back because the Street understand the business?

Jim Cramer isn't sure. But he is sure the valuations in Northern Oil & Gas are relatively understated relative to most other firms in the same business.

"Could this laggard become a catch-up play?" asked Cramer. "I'd research the story and take a closer look."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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