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The Great Bakken Buyout Continues

Much Ado About Bakken

Written by Keith Kohl
Posted September 21, 2012 at 11:38AM

Again?

During the month of July, more than 20 million barrels of oil flowed out of North Dakota wells.

How many of us are really surprised to hear North Dakota has surpassed that benchmark?

At this point, breaking records has become such a regular occurrence for the state, we're bound to be desensitized soon...

While Alaska is struggling to keep production above 500,000 barrels per day, the Midwest state pumped out 670,000 barrels per day, further widening the production gap.

At this point, there's absolutely no chance of catching up.

Alaska's production has been in a death spiral for decades:

alaska 9-21

Unfortunately, Alaska is at a critical breaking point. When the Last Frontier's production falls below 600,000 bbls/d, the EIA is predicting some serious issues will develop with the 800-mile Trans-Alaska pipeline.

Considering how much difficulty Big Oil is having there, it's only a matter of time before they start moving on to greener pastures...

My colleague Jeff Siegel made a note of Shell's latest disaster this week.

Big Oil is already making their move into the North Dakota oil patch...

One of the world's largest publicly-traded companies recently paid Denbury Resources $1.6 billion for 600,000 acres in North Dakota and Montana. For the record, that increases their Bakken position by 50%.

I guess Big Oil's new strategy is if you can't beat 'em, buy 'em — and we're perfectly fine with that.

The Black Gold Rush

By now, every investor should have a recipe for success in the Bakken. It offers a little something for everyone — and the proof is in the profits.

We've mentioned the Buffett route several times recently. The billionaire threw his $34 billion ante into the Bakken pot after buying out Burlington Northern Santa Fe a few years back. And trust me when I say Warren's not dishing out that much cash on a hunch...

One of the worst-kept secrets in North Dakota is that pipeline capacity was reached years ago, and he's betting on the infrastructure plays that'll bring the light, sweet Bakken crude to market.

In many ways, it's one of the safer investments to hold — even in a tumultuous market climate.

Last month I showed you exactly how these stocks have panned out for investors during the past twelve months (click chart to enlarge):

pipe rail 9-21

Pipe or rail, it makes no difference to us.

Big Oil, on the other hand, is taking a different route — but they're using the exact same tactics as Buffett, throwing billions of dollars into the play.

And lucky for us, it's all too easy to spot their targets. That, dear reader, is where individual investors like you and I can take advantage of their greed.

You don't need to have billions of dollars at your disposal. You don't need to have a secretary that makes more than $200,000 a year. And you certainly don't need to be an insider to take advantage of a domestic oil and gas boom.

The truth is we find it easier to let their money work for us.

When Statoil paid $4.4 billion for Brigham last year, my readers were the ones that walked away the very next day, their pockets flushed with cash...

Just a few months prior to that, my readers banked an overnight profit of 61% when BHP Billiton shelled out $12 billion for Petrohawk. That particular one turned out to be the fifth-largest deal of 2011...

The year before that, they were taking advantage of ExxonMobil's first shale gas venture with its XTO Energy — a deal that came with a $41 billion price tag...

Believe me when I tell you Big Oil's spending spree is far from over.

Six of the biggest publicly-traded oil companies in the world have over $100 billion in cash. That list includes ExxonMobil, CNOOC, Chevron, BP, Total SA, and Statoil.

More importantly, they have a small pool of potential Bakken drillers trading at incredibly cheap levels to bid on.

Remember, these are the companies that have been developing the Bakken Formation for the past five years, turning it into the success story you see splayed across media headlines today.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

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.

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