The Value of Bakken Oil Production
The Second Wave of Bakken Profits
Today, the Bakken formation is the most profitable oil play in the U.S.
Of course, you already know this... It's been an invaluable source of wealth for us.
In fact, my readers and I were among the first to get our feet wet in the Bakken. And believe me, the first round of Bakken plays proved wildly successful. Even a massive global recession would not shake our confidence.
It's with a heavy heart that I tell you that the first round of Bakken profits has come and gone. The Bakken is no longer an exploration gamble for oil companies.
The track has been laid, and the time for has come for those Bakken companies to put up or shut up.
But don't feel too bad if you missed the first round... Because in seven days, the Bakken game is going to change — and the second wave of profits is about to unfold.
You see, once the new price assessments are released, the cat will be out of the bag.
Our Bakken players stand to make a small fortune, and one of my favorite Bakken stocks in particular is leading the pack.
More on that opportunity in a minute...
Breaking the Ice: The USGS Report
I want to take a moment to explain just how the Bakken became the hottest oil play in the U.S.
First, let me clear up some confusion. The Bakken formation is not a basin. Rather, it's a rock formation located beneath the Williston Basin.
The Bakken is approximately 200,000 square miles, stretching across Montana, North Dakota, and Saskatchewan.
The first round of Bakken profits began two years ago, when the USGS released a groundbreaking survey on the potential of the Bakken formation.
The April 2008 survey was extremely important. For starters, it was the first assessment of the Bakken since 1995. The agency's 1995 survey estimated that the Bakken contained roughly 151 million barrels of recoverable oil.
I realize that doesn't sound very impressive. However, when the 2008 survey was published, it reported that the Bakken formation held up to 4.3 billion barrels of undiscovered, technically recoverable oil.
And that amount of oil is about 25 times more than the previous survey.
As you can expect, oil companies scrambled to pick up as much Bakken land as possible.
Even back in 2008, something about the USGS report didn't sit well with us. It wasn't enough. We knew that the drilling and completion techniques were becoming more efficient by the day.
Naturally, it was only a matter of time before the Bakken play took off...
And that time has come.
A Bull Amongst Bears
Unless you are new to Energy and Capital, there's a good chance you've heard about the Bakken oil formation.
Make no mistake; the Bakken is one of the few reasons to be excited for U.S. oil production. As you know, U.S. domestic production peaked in 1970 and has been declining ever since.
Thanks to the production from the Bakken, North Dakota has become our fourth largest oil producing state. Last year, North Dakota pumped out 79.7 million barrels of oil — about 218,000 barrels per day.
Last November, Forbes projected that oil production in North Dakota would increase to 350,000 barrels per day in 2010.
Compare that to the trouble our top three oil producers are having: Texas, Alaska, and California's oil production are in serious trouble. Since 1990, each of those states managed to increase year-over-year oil production only twice.
Bakken production is estimated to reach 500,000 barrels over the next five to ten years. At this pace, I wouldn't be surprised to see North Dakota overtake California's spot within the next five to seven years, especially considering California's oil industry has been in a downward spiral for decades.
Besides, California's struggle with the Kern County oil flop doesn't exactly make a strong case for boosting oil production.
The Second Round of Bakken Profits
So what's so special about the upcoming price assessments?
On May 3, 2010, Platts is releasing the world's first price assessments valuing the crude oil production from the Bakken formation.
And we're not talking about heavy oil here, folks... The light, sweet crude from the Bakken is the kind of high quality oil that refiners love.
The new daily spot assessments will place a value on the Bakken oil injected into the pipelines at Clearbrook, Minnesota, and Guernsey, Wyoming. The two Bakken blend assessments will be based on a market-on-close methodology — which, according to Platts, takes bid, offer, and transaction data by company of origin and develops a time-sensitive daily price assessment at market close.
Securing Your Bakken Profits Now
Up until this point, the media has completely missed the boat.
Once these price assessments show us the true value of Bakken oil, you can bet our best players won't remain cheap for long...
The clock is ticking. And this time around, you don't want to be on the sidelines when these Bakken stocks double in 2010.
Until next time,
Investment Director, The $20 Trillion Report
Editor, Energy and Capital
Energy Demand will Increase 58% Over the Next 25 Years
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