Montana's Second Oil Boom Begins
Why Montana Oil Profits Won't Leave Investors Out in the Cold
We can't help but feel sympathetic for Montanans.
Much like the rest of the country, Montana's oil production was in a downward spiral for as long as anyone could remember.
Between 1981 and 1999, the state's output was cut in half.
Things weren't looking good...
But at the turn of the century, good news finally struck. (Remember, we're talking years before the shale revolution began — nearly a decade before the USGS's reassessment of the Bakken formation in 2008.
The newfound success was thanks to the discovery of the Elm Coulee oil field, located in Richland County on the eastern edge of the state, in 2000.
By 2005, development was in full swing:By June of 2006, Montana reached the 100,000 bbls/d mark for the first time in history (with more than half of that amount coming from just Elm Coulee).
A year later, the field was considered the highest-producing onshore field in the lower 48 states discovered since 1950.
Unfortunately, the fairy tale didn't last. We know how Montana's oil fortune played out.
Despite the good news, state production fell by more than 30% over the last five years. And at the same time, Montanans had to sit back and watch neighboring North Dakota's fame and good fortune take off...
For the good folks of the Treasure State, the grass really was greener on the other side. And the economic impact has been nothing short of a miracle.
The reasons for Montana's envy are many:
First, there's the 3.4% unemployment rate that North Dakota enjoys (more than half of Montana's own unemployment rate)...
Then there's the nearly billions in revenue the state will make over the next few years...
And North Dakota residents are getting wealthier by the day. According to the U.S. Dept. of Commerce, personal income in the state grew by 6.9% in the first quarter of 2011 compared to the fourth quarter of 2010...
Tack on the fact that all this growth isn't slowing in the slightest...
With more than 10% of all the oil and gas rigs in the United States drilling on the western side of North Dakota, it's only a matter of months before it surpasses the production rates of Alaska and California.
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Investors Won't Be Left Out in the Cold
We've said so before, but Montana has become the forgotten step-child of the U.S. oil boom.
Which is just one of the reasons why most investors won't see these profits coming.
All the telltale signs of an upcoming boom are there, and I believe some of the best sleeper picks for 2012 and 2013 will come from the Treasure State.
This may be the year that Montana regains some of the spotlight.
We've been following the increased activity in Montana's oil and gas industry throughout 2011, and certainly won't be surprised if the state doubles — or even triples — current production in the next three years.
As you can see below, the number of oil rigs drilling on Montana soil has surged 137% compared to last year:
Although it's nowhere near the number that North Dakota has, it's a good sign going forward.
And some of those drillers have been very successful. Several months before it was bought by Statoil for $4.4 billion, Brigham reported a new record initial production rate for its Johnson well in Richland County, Montana.
All the major Bakken players have a stake here, from Continental Resources to Whiting Petroleum.
Of course, both of those Bakken investments have panned out well for early investors:
Seeing both of those Bakken stocks nearly double since early October, most people think they've missed out.
What they don't realize, however, is that the next stage of the U.S. oil renaissance is only beginning...
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.