Tag Archives: Bakken Shale

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This State Quietly Became an Economic Powerhouse

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By Travis Hoium, The Motley Fool

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Over the past decade, no state has grown faster than North Dakota. It leads in GDP growth and personal income growth, and it has a wide lead in oil production growth. So how did one of the coldest, flattest, least populated states in the country become an economic hot spot?

The bang that led to a boom
Oil was discovered in western North Dakota in the Bakken formation in 1951, and for a long time there’s been a limited amount of drilling in that part of the state. Until recently, the technology didn’t yet exist to extract most of the oil trapped between rocks — shale oil — at an economical cost.

In the early to mid 2000s, companies such as Halliburton developed the technology to extract both oil and gas from shale plays economically, unlocking energy plays across the country. One of the largest plays in oil was the Bakken Shale in western North Dakota and eastern Montana, and companies flooded in to pick up as much land as possible.

Today, Continental Resources , Whiting Petroleum , Statoil , and Kodiak Oil & Gas have access to nearly 2 million combined acres ,equivalent to 1,280 square miles. They’re dotting the plains of western North Dakota with drilling rigs and production wells. All of this drilling has led to massive growth in oil production, which brings economic development and jobs to this once forgotten state. For a visual showing how fast oil production grew, click here to see a 25-year EIA time lapse of energy production in the Bakken. 

All of this oil production has been fabulous for the economy and the residents of North Dakota. Over the past decade, North Dakota‘s GDP has grown at an annual rate of 4.04%, which compares with 0.54% nationally. Only Oregon can compare, with 3.36% growth. Every other state in the country has grown at a compound rate of less than 2% over that time.

More jobs than the prairie can handle
The explosion in GDP growth hasn’t been enjoyed just among the oil big wigs: There’s been huge growth in personal incomes as well. According to the Bureau of Economic Analysis, since 2005 per capita personal income has grown at a compound rate of 7.25% in North Dakota, which is more than a 50% increase in salary over six years. That compares with just 2.69% in the U.S. and 4.19% in second-place Louisiana, which also benefits from the growth in oil production. Here’s a look at the top five states for personal income growth since 2005. 

Amazingly, there are 11 counties in North Dakota that have seen per capita personal income grow 11.48% or more per year over that time, nearly doubling salaries.

If you’re interested in one of these high-paying jobs, you might have to find a home on

From: http://www.dailyfinance.com/2013/04/14/how-north-dakota-quietly-became-an-economic-powerh/

Business, Finance, Occupation & Industry

The U.S. Oil Import Story in 5 Charts

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By Aimee Duffy, The Motley Fool

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You can’t read the news lately without some mention of the current domestic energy boom. The U.S. is producing more oil than it has in a long time, and as a result we are importing less oil than we have in decades. Today, I’m going to take a closer look at five charts to show what it is exactly we are importing, where it comes from, where it goes, and what our energy import future really looks like.

1. Imports by type
Unless explicitly referred to as crude oil, when we read about “oil imports” the number tossed about often includes refined petroleum products such as diesel, jet fuel, and gasoline. Though the overwhelming majority of our oil imports are in fact comprised of crude oil, we do import significant quantities of refined products. In March, crude oil imports were about 7.6 million barrels per day, while products imports came to about 1.8 million barrels per day. The chart below shows the types of products and relative quantities that made up the bulk of our petroleum imports last year, not including crude oil.

Source: EIA 

2. Imports from world regions
Many politicians tout “North American” energy independence as an achievable goal in the coming years, and the chart below indicates why. As recently as March of this year, Mexico and Canada were two of our three top sources for oil imports. In fact, in January Mexico actually sent us more oil than Saudi Arabia did, the difference between imports from the two countries often comes down to volumes as small as 100 barrels per day.

Source: EIA 

You’ll notice that imports from Nigeria and Angola are among the smallest slivers in this pie chart. Light sweet crude from West Africa has almost completely been replaced by light sweet crude produced domestically in places like North Dakota and South Texas.

3. Imports to U.S. regions
Our changing import story has different effects on different regions of the country. For example, the major refining center on the Gulf Coast has drastically cut imports, as evidenced by the chart below. That move makes sense: Domestic oil is cheaper, so refiners are buying that instead.

Source: EIA 

The Midwest region is increasing imports, which sounds perplexing; after all, the Midwest is home to the Bakken Shale, the source of much of U.S. production growth right now. But the Midwest also serves as a hub for Canadian crude imports, and that line on our chart will probably continue to tick upward in the future.

4. Watch out for falling imports
Last month, the EIA released a report that indicated that if everything goes according to plan, next year the U.S. will produce more oil than it imports for the first time since 1995.

Source: EIA 

5. Surging domestic production
As the chart above shows, increasing production is a big part of

From: http://www.dailyfinance.com/2013/04/13/the-us-oil-import-story-in-5-charts/

Business, Finance, Occupation & Industry

CAPScall of the Week: WPX Energy

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By Sean Williams, The Motley Fool

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For years, satirical late-night TV host Stephen Colbert has been running a series on his show called “Better Know a District,” which highlights one of the 435 U.S. congressional districts and its representative. While I am no Stephen Colbert, I am brutally inquisitive when it comes to the 5,000-plus listed companies on the U.S. stock exchanges.

That’s why I’ve made it a weekly tradition to examine one seldom-followed company within the Motley Fool CAPS database, and make a CAPScall of outperform or underperform on that company.

For this week’s round of “Better Know a Stock,” I’m going to take a closer look at WPX Energy .

What WPX Energy does
WPX Energy is an independent oil and gas exploration and production company, with wells in the Bakken and Marcellus shales, as well as the Piceance, Powder River, and San Juan basins. It also holds a majority interest in Apco Oil & Gas, which operates out of Argentina and Colombia. WPX‘s 2012 end reserves totaled 4.65 trillion cubic feet of natural gas equivalent including its overseas assets, and claimed a mixture of about 75% gas and 25% liquids (oil and natural gas liquids). 

In the fourth quarter, WPX reported 40% growth in oil production, 3% growth in natural gas liquid production, and 2% natural gas production growth during the quarter. However, WPX still lost $1.12 for the year as the company experienced a 22% decline in realized natural gas prices, and it wrote down $225 million in non-cash impairments because of the falling price of natural gas.

Whom it competes against
WPX has a triple threat it has to contend with: its competitors, the spot price for natural gas, and the rising costs of E&P.

As you might imagine, a finite amount of land available for exploration makes finding valuable natural gas and liquid assets quite the premium. According to my Foolish colleague Tyler Crowe, 12% of WPX’s assets are oil-based, of which many lie in the oil-rich Bakken Shale. This formation is known for its high-yielding oil reserves and is led by Continental Resources and EOG Resources . One smart tactic nearly all Bakken producers are using is shipping their oil production by rail to Louisiana terminals instead of selling it at the wellhead or in Cushing, Okla., because Brent prices at shipping terminals in Louisiana are paying out significantly more. In December, the North Dakota Pipeline Authority estimated that 64% of daily production was being shipped this way, which makes for plenty of extra profits for all involved — especially WPX, which saw oil production growth of 98% in the Bakken in the fourth quarter.

Realized natural gas prices can also be a friend or a foe, depending upon how you look at things. Chesapeake Energy , for example, leaned very heavily toward natural gas production as recently as early last year. However, weak natural gas prices necessitated a shift away from nat-gas drilling and production and toward Chesapeake’s more liquid-rich assets. …read more

Source: FULL ARTICLE at DailyFinance

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Why Do Energy Companies Form Joint Ventures?

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By Matt DiLallo, The Motley Fool

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A joint venture, as you know, is a business agreement between two parties to develop a new entity whereby each party contributes assets. Those assets could be cash, equity, operating assets or intellectual property. The key is that the companies see greater value in combining the assets than in operating them separately.

The energy industry is the king of joint ventures. There are two driving forces behind this phenomenon. First, energy exploration and production is very, very expensive. Many smaller firms simply cannot afford to develop the resources they’ve discovered. Energy exploration is also a very risky business. Joint ventures are great for spreading around that risk.

Some companies, like Devon Energy , have a specific rationale in determining how it plans to utilize joint venture partners. The company specifically utilizes partners in new venture exploration because it:

  • Improves capital efficiency
  • Accelerates de-risking and commercialization
  • Mitigates exploration risk
  • Increase flexibility to generate new prospects
  • Preserves cash flow for development projects

The company’s most recent joint ventures include trading about a third of its emerging exploration acreage in two separate deals with foreign operators. Devon brought in about $4 billion in cash and drilling carries to fund these developments at a faster pace than it would have been able to do on its own.

Others take a slightly different approach. Chesapeake Energy  just recently entered into its own joint venture with a foreign producer. In this case, the company just took the cash. The billion dollars will help the cash-strapped company to fund its developments in this acreage as well as across its portfolio. Its Chinese partner is looking to Chesapeake to provide it with on the job training that it can take back home to produce its own unconventional resources. In both cases the foreign partner was looking to exchange cash for access to emerging resources: One deal for the seller was about risk management, while cash management played a key role in the other transaction.

Energy industry ventures aren’t just for upstream exploration activities. There are myriad examples in the midstream sector as well. These deals tend to have a slightly more strategic rationale behind them.

One recent example saw Energy Transfer  and Enbridge  team up to convert several segments of the Trunkline pipeline from moving natural gas to oil in a new 50-50 joint venture. The project will provide crude oil pipeline access from an Illinois hub to the eastern Gulf Coast refining market. The oil from the Illinois hub will be sourced from the Bakken Shale and Canadian oil sands, which currently can’t access that market by pipeline.

This deal is about access and diversification. Enbridge has the access to these crude oil basins through its Southern Access Extension that is currently in development, but it needs a way to get that crude to the Gulf Coast. Energy Transfer‘s Trunkline pipeline would do the trick. Energy Transfer on the other hand has been looking to diversify its revenue into crude oil transportation. By …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Secret Winners in the North Dakota Oil Story

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By Aimee Duffy, The Motley Fool

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North Dakota has the lowest rate of unemployment in the U.S. right now. Some of its cities are facing unprecedented population growth and still, there are jobs aplenty. Why? Because of oil. A recent post by our friends at the Energy Information Administration, or EIA, points out that at the end of last year crude oil and lease condensate production had reached an all-time high of 770,000 barrels per day. That’s impetus enough to take a closer look at the state and highlight a few investment opportunities.

The data
North Dakota‘s success is relatively new. Ten years ago the state was averaging oil production of fewer than 100,000 barrels per day. Production started to ramp up in 2008 and has grown exponentially since then:

Source: EIA

Unbelievably, production has grown by more than 200,000 barrels per day in one year and the state now accounts for more than 10% of all American oil production. 

Almost all of this growth can be attributed to horizontal drilling and hydraulic fracturing in the Bakken Shale. In fact, 95% of the wells drilled in North Dakota utilize hydraulic fracturing to bust open shale rock and free the crude oil trapped inside. 

The trend
The top three producers in North Dakota are Continental Resources, Hess , and Whiting Petroleum . Whiting and upstart Kodiak Oil & Gas have some of the lowest drilling times in the Bakken, while Hess has one of the highest.

For all intents and purposes, oil production in the Bakken is the same as it is in any shale play. Drill a well, fracture, pump oil to the surface. Once it gets there, however, the story changes. Pipeline capacity in North Dakota is woefully insufficient. As a result, 75% of the state’s oil production is loaded into a truck and taking to rail loading sites where it is then shipped out to refineries. 

Unconventional winners
With that in mind, investors will do well to consider who touches this crude as it travels from wellhead to market. And forget about what you know about the midstream industry. Traditional pipeline players like ONEOK Partners have already been burned as producers refused to commit to its Bakken crude pipeline proposal last year. Instead, look at players like Enbridge that are expanding rail infrastructure from North Dakota to the East Coast — a very lucrative market — to capitalize on this new transportation paradigm.

In fact, forget about what you know about refiners at the same time. East Coast refining was supposed to be dead, but Bakken crude is making a Frankenstein out of the industry. PBF Energy is a perfect example of this. The company has built a rail unloading facility at its Delaware City refinery and is looking to replace its slate of expensive foreign crudes with North Dakota‘s cheap stuff.

Foolish takeaway
Our first thought when oil production ramps up is to focus on the …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

CAPScall of the Week: Sanchez Energy

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By Sean Williams, The Motley Fool

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For years, satirical late-night TV host Stephen Colbert has been running a series on his show called “Better Know a District,” which highlights one of the 435 U.S. congressional districts and its representative. While I am no Stephen Colbert, I am brutally inquisitive when it comes to the 5,000-plus listed companies on the U.S. stock exchanges.

That’s why I’ve made it a weekly tradition to examine one seldom-followed company within the Motley Fool CAPS database, and make a CAPScall of outperform or underperform on that company.

For this week’s round of “Better Know a Stock,” I’m going to take a closer look at Sanchez Energy .

What Sanchez Energy does
Sanchez Energy is an oil and gas exploration and production company. Its primary assets are liquid fuels (e.g., oil and liquid natural gas) in the Eagle Ford Shale region, where it holds approximately 95,000 acres. Sanchez also has undeveloped acreage interests in the Bakken Shale and Haynesville Shale. Sanchez currently has 34 wells in operation with an additional 17 in various stages of drilling or completion.

For 2012, Sanchez Energy reported 468.8 million barrels of oil equivalent production, or MBOE, which was a 170% improvement over its production in 2011. Although production volume surged, average production per well dipped as demand dropped and the company spent heavily in bringing 19 new wells online. Revenue for the year grew 197% to $43.2 million despite a dramatic drop in natural gas prices, although the company produced a loss of $0.56 for the year. 

Whom it competes against
As you might imagine, competition is at a premium for acreage in the Eagle Ford Shale. Although natural gas drilling has abated with prices down in the doldrums, NGL and oil drilling remains as profitable as ever. EOG Resources is the king of the Eagle Ford region, having produced in excess of 29.5 million barrels of oil through the first 11 months of 2012. By comparison, Burlington Resources was a distant second at 16.1 million barrels of oil produced. Sanchez is a relative newcomer, so obtaining additional acreage has been difficult.

Unlike its Eagle Ford Shale acreage, which it nearly owns outright, many of its undeveloped acreage is shared interest. Sanchez has 1,500 net acres in the Haynesville Shale region of Louisiana, which it listed in its S-1 prospectus as operated by Chesapeake Energy and EnCana . Neither of these two natural gas behemoths have been looking to splurge recently with natural gas prices down, so this 1,500 acres, while small, could be a troublesome asset to sell if Sanchez has no plans to utilize it.

In the Palmetto region, which is located in the Eagle Ford Shale, it does share a 50/50 working interest with Marathon Oil . With the Palmetto area more rich in volatile oils, it’s not devastating for a company like Sanchez to share its working interests here. The key is that its Maverick region is ripe with black oil, and it …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Could This Tiny Company Be in the Energy Sweet Spot?

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By Brian Stoffel, The Motley Fool

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If America were to become energy independent — whether because of new reserves being found, technological innovation that improves efficiency, or people simply cutting down on their consumption — it would be a major change both for our way of life and how we relate to the rest of the world.

But saying that energy independence is as easy as one-two-three, and actually carrying that potential out, are two completely different things.

One of the key drivers to energy independence are the bountiful reserves of both oil and natural gas. These reserves were once inaccessible, but with modern-day fracking techniques, are now more or less open to development.

Take a look at how expansive these reserves are across the United States:

Source: Energy Information Association

But these techniques are not without their drawbacks, especially due to environmental concerns that fracking damages local ecosystems, poisons underground water tables, and may even cause earthquakes.

While the nation’s top pure plays on natural gas extraction — namely Chesapeake Energy and Anadarko — would lose profit due to tighter safety standards the government could impose on fracking, there exists a tiny company that could be sitting in the sweet spot between energy independence and environmental stewardship: Heckmann .

Read below to see why I would say that, what the company’s latest earnings release revealed, and at the end I’ll offer up access to a special premium report on a major energy company.

Why such a sweet spot?
Earlier this year, I provided a primer on the precarious ground Heckmann occupies. The company has two main divisions: fluids management and recycling.

The fluids management division fulfills the needs of energy extractors, both natural gas companies — like Chesapeake and Anadarko — and oil companies. The fracking process itself requires copious amounts of water, and Heckmann has built out an infrastructure of pipelines and natural gas trucks to help meet these basic logistical needs.

The recycling division works to take both water that has oil or other pollutants in it, as well as water that’s been used in the fracking process, and recycle that water so that it is once again useable.

As the debate rages on about the safety of fracking, I contend that Heckmann can have it both ways. If the energy companies have their way and fracking is deemed safe, Heckmann already has the infrastructure in place to meet the needs of the industry. If, on the other hand, there are significant safety and environmental requirements that are added to keep fracking legal — but the demand for alternative energy remains strong — Heckmann has an astronomical lead over other water treatment companies like Veolia Environmental , which is having its own problems navigating debt troubles.

And even though it already had a presence in this niche, Heckmann’s purchase of Power Fuels — a water treatment company with heavy exposure to the booming Bakken Shale in North Dakota — puts …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Domestic Energy Dynamics Continue to Shift

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By Taylor Muckerman and Joel South, The Motley Fool

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Based on the low price of natural gas, many companies have been switching their drilling operations from targeting natural gas to drilling plans that are heavier on crude oil. This is evident in the fact that the quantity of land rigs drilling for natural gas has reached the lowest point since May of 1999. Meanwhile, oil rigs are at a 12-week high at the moment. As this production of natural gas begins to wane, demand and supply could approach a better balance, which should help the price return to a profitable level for the key players in the industry.

Another area of flux is the way in which companies in the midcontinent plays, like the Bakken Shale, are transporting the crude oil once it has been pumped from the ground. Pipelines have been all the rage over the last few years, but due to the amount of time it takes to construct them, and the amount of political red tape companies must deal with, railroads have been taking a bite out of the market share. Better access to the West Coast and Canada are also both prime reasons why this transport via rail could continue.

After switching a decent amount of production to natural gas, is CHK ready to take off? Energy investors would be hard-pressed to find another company trading at a deeper discount than Chesapeake Energy. Its share price depreciated after negative news surfaced concerning the company’s management and spiraling debt picture. While these issues still persist, giant steps have been taken to help mitigate the problems. To learn more about Chesapeake and its enormous potential, you’re invited to check out The Motley Fool’s brand new premium report on the company. Simply click here now to access your copy.

var FoolAnalyticsData = FoolAnalyticsData || []; FoolAnalyticsData.push({ eventType: “TickerReportPitch”, contentByline: “Taylor Muckerman and Joel South“, contentId: “cms.23008”, …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Warren Buffett Loves Energy Investments. Should You?

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By Aimee Duffy, The Motley Fool

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Warren Buffett made headlines last month when he announced that his company, Berkshire Hathaway , was buying Heinz. Ketchup is delicious, and a company that makes it is pretty easy for the average American to understand; we see ketchup, we get ketchup.

Some of Buffett’s other investments can be a little bit more complicated — particularly when it comes to the energy industry — but that doesn’t mean they should be off the table. In fact, Buffett has shown tremendous foresight in his energy-related deals over the past few years, and investors hip to his thinking stand to reap profits of their own.

Buffett and solar
At the beginning of this year, Berkshire Hathaway subsidiary MidAmerican Energy announced that it was buying a 579 megawatt solar plant from SunPower for about $2.5 billion. The new plant will make a nice addition to MidAmerican’s two other solar plants that First Solar is building for the company in California and Arizona. These purchases will add to the subsidiary’s growing portfolio of renewables, which also includes wind, geothermal, and hydro.

The future of renewable energy looks bright, and solar is one of the many ways investors can take advantage of that trend. After all, the U.S. is slated to generate 10 GW of power from solar energy by the end of this year, so there must be something to that. But Buffett isn’t limiting his investments to solar power; he is investing in all facets of the American energy story, including oil and gas.

Buffett and oil
In 2009, Berkshire Hathaway purchased Burlington Northern Santa Fe. Buffett said he was making an “all-in wager on the economic future of the United States” at the time. That bet has paid off in spades, as only a few years later oil production in the Midwest has kept unemployment down and revitalized railroads. How? Production of the black gold has grown beyond the capacity of regional pipelines, forcing producers to use trains to get it to market — Warren Buffett‘s trains, to be precise.

The Energy Information Administration has helped put this trend in context, pointing out that oil (and petroleum products) is the fastest-growing commodity-by-rail shipping movement right now:

Source: EIA. 

And of course, Buffett’s railroad just happens to be the largest holder and operator of rail lines in North Dakota, the origin of all this oil. It’s estimated that 52% of oil produced in the Bakken Shale is transported out of the play via rail right now. BNSF is doing its part and expects to cart out 700,000 barrels each day by the end of this year.

Buffett and gas
But Buffett’s energy connection doesn’t end there. BNSF recently announced that the railroad will begin experimenting with natural gas as a transportation fuel this year. Instead of running on costly, polluting diesel, a select number of BNSF locomotives will run on cheaper, cleaner natural gas. BNSF is one of …read more
Source: FULL ARTICLE at DailyFinance