I knew it was too good to be true.
At least, that's the feeling I got earlier this morning. Out of all the emails I receive on a daily basis, there's always one that usually makes me laugh. Trust me, it's not easy to laugh at 5:30am.
Last time, I was told that oil was on the verge of plummeting to $20 a barrel. Naturally, there was a way to safeguard your investments when oil prices fall. I can only imagine how they felt once oil prices shot past $100 a barrel.
This morning, however, was a different story. Rather than making another ridiculous prediction, their subject struck home with me. Now, my readers know how I feel about the Alberta oil sands. But this email was focused on Saskatchewan's oil sands, not Alberta's.
Again, I couldn't help thinking that my friend has missed the boat yet again. At least he got the right province. I'll get to that in a second.
Like most things, there was a pretty huge catch. We're talking about unexplored land. Sure, the oil will ultimately be there, but how long do you think it will take to get production up and running? You don't need me to tell you the risk involved in the oil markets.
I know what you're thinking, "So if they already missed the boat, aren't we in the same situation?"
Well, I wouldn't say that just yet.
The Williston Basin's 'Bakken' Formation
By now, most of you have heard about the emerging Bakken oil formation. Most of the Bakken play can be found in the Williston Basin, which stretches across North Dakota, Montana, South Dakota, Manitoba and Saskatchewan. In total, the basin covers roughly 300,000 square miles.
Although the Williston Basin is receiving a record amount of interest from oil producers because of the Bakken formation, there are also several other prospective plays, including the Red River formation.
Unlike the heavy oil that's still undiscovered in northern Saskatchewan, the oil from the Bakken is 41 degree light, sweet crude. In other words, it's a lot more desirable by oil producers.
For the moment, I don't want to get too caught up with the amount of oil in the Bakken. The reason is fairly simple: The U.S. Geological Survey (USGS) is about to release news that could keep the area red hot for the next couple of years.
Investors like us, however, only have 48 hours left.
Two Days Until the Williston Takes Off
April 10, 2008.
Mark that date in your calendars. According to Senator Byron Dorgan (from North Dakota), that is when the USGS will release its study on the Bakken formation. Previous high estimates have hinted at reserves being up to 500 billion barrels. The new study will narrow down the amount of oil recoverable based on the new technology being used.
Regardless of whether the Geological survey confirms that high estimate or not, you can bet there will be a huge number of producers scrambling to get a piece of it. In other words, if the Williston Basin lives up to its potential, we're going to see a drastic increase in production over the next few years.
Think of what that means for a just a second...
Based on data from the Energy Information Administration, the U.S. imported about 5.9 million barrels per day from OPEC countries in 2007. Considering oil prices averaged $72.32 a barrel last year, that means we shelled out $426 million every day. One way or another, we're going to have to kick the Middle Eastern oil habit.
Investing in the Williston Basin
Don't get me wrong, I'm not trying to suggest that the Williston Basin will be pumping over five million barrels of oil a day in a few years.
We can, however, expect a record amount of investment to flow into the Williston Basin over the next five years. Not just for drilling, but also to provide the infrastructure necessary to support the producers.
Not surprisingly, we've seen a few of our favorite oil sands companies stake a claim in Southeastern Saskatchewan. On the U.S. side of the Williston Basin, Bakken oil production won't be enough to save U.S. production from peak oil, but it will be an excellent opportunity for investors.
The window for investors won't be completely shut when the new USGS survey comes out in less than 48 hours. The problem, though, is that if you wait until after it is released, you're going to miss the first round of profits.
Most of my Energy and Capital readers know exactly what I'm talking about. Their latest Bakken plays in the Williston Basin have been a huge success so far. Trust me, it's going to be even more hectic once the new survey comes out on Thursday. If you're interested in jumping on board with your fellow readers, feel free to check out the $20 Trillion Report.
Until next time,
Keith Kohl
Editor's Note: The U.S. Geological Survey just released its long-anticipated study revising its estimates of the Bakken formation. The report confirms the Bakken is the largest "continuous" oil accumulation ever assessed by the USGS... and has 25 times more oil than its previous estimate. The Bakken story is just heating up, and investors are now faced with an unprecedented opportunity to capitalize. Learn more in this breaking Bakkan report.
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