Preparing for Another Flood of Bakken Oil

Keith Kohl

Written By Keith Kohl

Posted November 7, 2010

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.

We’ll call it envy.

For the last few years, Montanans have had to sit and wait patiently, watching North Dakota’s fortune soar to record heights.

And they have good reason to be jealous…

Last week, I showed you some of North Dakota’s success. The numbers don’t lie. Approximately 154 rigs are actively drilling in the state, with more than 95% of them focused on tapping into the now-famous Bakken formation.

As you know, the Bakken formation is found in the Williston Basin, and stretching across parts of North Dakota, Montana, Saskatchewan, and Manitoba.

So far, only North Dakota and Saskatchewan have taken advantage of their share of the Bakken.

For Montana, things are about to change for the better.

The Bakken infection spreads in 2011

In 2005, more than 1,300 oil and gas permits were issued. However, most of their drilling at the time was focused on shallow gas targets.

And we all know the story of natural gas prices…

The supply glut, thanks mostly to the surge in shale gas activity, has sent prices into a slump that could last years.

It felt like drillers just gave up — or at least put Montana on hold.

According to Baker Hughes’ rig count, only ten rigs are currently drilling in Montana. All are operating on the eastern border, right in the Bakken.

The last time I talked about the upcoming Montana oil boom was three months ago. At the time, only five rigs were active.

Now, you might think that ten rigs doesn’t seem too impressive. And they’re not, really. Not right now, at least.

However, also take into account the permit frenzy taking place.

Montana is expected to issue more than 300 oil and gas permits by the end of the year. In twelve months, it’s going to be a whole different story.

How to play the Bakken

The oil majors are taking notice, too: Exxon’s acquisition of XTO and Hess’s latest move to buy American Oil and Gas are just two examples.

Unfortunately, I can’t get behind the oil majors.

Some of the big players like Exxon — even with their latest purchase of XTO — just won’t make the cut. Those oil majors won’t give you the best bang for your buck.

I recommend sticking with the smaller drillers that have been perfecting their drilling and fracking procedures for years. They bring a wealth of experience to the table.

Here’s a look at several of my favorite Bakken companies, all of which will establish a strong presence in Montana over the next few years…

5 bakken drillers 11-5-10

As always, below you’ll find the week’s top-read articles from Energy and Capital and Wealth Daily.

Enjoy your weekend,

keith kohl

Keith Kohl
Editor, Energy and Capital


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