Exploration and production companies have been gushing about the Bakken Shale and have directed capital and other resources to that area over the last few years. This trend continued at a reduced rate in the recent first quarter. This continued investment was driven by high returns on investment due to lower service costs and the higher price of oil relative to natural gas.
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The Bakken Shale is an oil-bearing shale present in North Dakota, Montana and Canada. The U.S. Geological Survey estimates 3.65 billion barrels of recoverable reserves present.
Bakken Players
XTO Energy (NYSE:XTO) announced a successful well in the Bakken Shale in Q1 2009. The well is producing at a rate of 2,125 barrels per day. However, the company has decided to restrict production in the well to only 800 barrels per day until the price of oil moves higher. One small-cap play in the Bakken Shale is Brigham Exploration (Nasdaq:BEXP). The company has 308,000 net acres in the basin and said during its recent earnings conference call that the play is economically attractive to develop at an oil price as low as $40 per barrel. Service costs have also fallen in the Bakken as drilling activity fell in North America. Brigham said that costs were down 20-30%, and it expects that decline to reach 40% later in 2009. (Read more in Peak Oil: What To Do When The Wells Run Dry.)
MDU Resources (NYSE:MDU) has 28 operated wells in the Bakken Shale and currently has one rig running. The company also saw a sharp drop in oil service and drilling costs in the area, with a completed well cost falling from $7 million a year ago to a current range of $5 million to $5.5 million. The continued appeal of this play is confirmed by commentary from the management of Parker Drilling (NYSE:PKD), an oil service and drilling company active in North America. The company said that "The business has maintained its activity in the shale plays around Williston, North Dakota…specifically the Bakken…where drilling has been less affected by current conditions."
Meanwhile, Superior Well Services (Nasdaq:SWSI) made similar comments on its earnings call. David E. Wallace, CEO, said "One bright spot in the Rocky Mountain region is the Bakken oil shale play in North Dakota, where we are continuing to expand our presence." (For More, see Fueling Futures In The Energy Market.)
Bakken's Profitability Continues To Attract Investments
The Bakken Shale has continued to attract investments from the exploration and production companies active in the area, as the industry shifts capital during the downturn to places that will earn a better return relative to other higher cost areas.
For more, see our Oil And Gas Industry Primer.
