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The Rise Of North Dakota

Over the years, I have had the opportunity to travel to all 50 states. The last of the 50 states I visited was North Dakota. I suspect that is the case with most Americans; they either haven’t been or they had been to a lot of other states before they visited North Dakota. It’s too far north to be a major crossroads for just about anywhere, it’s sparsely populated, and prior to a decade ago there wasn’t a lot to attract the average person to the state. It was considered classic flyover country.

Times have changed. North Dakota is directly on top of the Bakken Formation, which is part of the Williston Basin that lies underneath parts of South Dakota, Montana, southwestern Manitoba and southern Saskatchewan. 

North Dakota is directly on top of the Bakken Formation, which is part of the Williston Basin that lies underneath parts of South Dakota, Montana, southwestern Manitoba and southern Saskatchewan. 

Source: US Geological Survey 

The US Geological Survey (USGS) has estimated that the Bakken contains 3.65 billion barrels of technically recoverable oil, while the Three Forks (which lies below the Bakken) is estimated to contain 3.73 billion barrels of oil. The two formations are also estimated to contain a mean of 6.7 trillion cubic feet (tcf) of undiscovered, technically recoverable natural gas and 0.53 billion barrels of undiscovered, technically recoverable natural gas liquids (NGLs).  

The Bakken was known to contain oil for many years but it just wasn’t economical to produce. Hydraulic fracturing and horizontal drilling changed that. In fact, the Bakken is one of the first places that comes to mind when I think about the shale revolution that started to boost U.S. oil production about a decade ago. Nowhere was there a larger change in the rate of production than North Dakota.

Up until about 2008, North Dakota hadn’t produced much more than 100,000 barrels per day (BPD). But in 2008 the shale oil boom started to pay dividends. In late 2008, North Dakota’s oil production reached 200,000 BPD and then climbed steadily to a peak of 1.2 million BPD in late 2014. The oil price crash caused oil production in North Dakota to fall in 2015 and 2016, but this year production has started to rebound. 

At present, North Dakota produces just over one million BPD of crude oil, good enough for 2nd place in the U.S. behind Texas. Oklahoma-based Continental Resources (NYSE: CLR) was a pioneer in the Bakken, and the largest leaseholder and oil producer there until Whiting Petroleum (NYSE: WLL) acquired Kodiak Oil & Gas. Now the two companies are very close, with Continental recently producing slightly more oil and Whiting slightly more natural gas.

Other major Bakken producers include ConocoPhillips (NYSE: COP), ExxonMobil (NYSE: XOM), Hess (NYSE: HES), EOG Resources (NYSE: EOG) and pure Bakken producer Oasis Petroleum (NYSE: OAS).

The current price of oil is probably not high enough to support much future oil production growth in the Bakken. Breakeven costs aren’t as low as in the Permian Basin, but should the price rise back to the $55-$60/bbl level, oil production should grow steadily for the foreseeable future.

What am I doing in North Dakota this week? I am here to deliver a talk at the 2017 Bakken Conference and Expo on my company’s efforts to eliminate flaring in oil fields. Following the conference, I will tour some oil production facilities, and hopefully, gain some new story ideas and some useful investment intelligence for subscribers of The Energy Strategist

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