It’s been too long since I drove a beat-up rental car down Route 2 in North Dakota — more than two years, to be exact.
Every time I passed a semi-trailer, I cursed Enterprise Rent-A-Car as my tiny blue Yaris hopped several feet to one side. Despite my terror at skipping by anything with more than two wheels, however, it turned out to be one of the most profitable trips of my career.
That was during the second round of Bakken profits, after the 2008 oil price crash created an unprecedented buying opportunity for investors. (Of course, the first round took place several years earlier, after companies like Continental Resources started to crack the code to the Bakken shale using horizontal drilling and hydraulic fracturing techniques.)
You see, the second round began the moment crude oil prices bottomed out at $33 per barrel in February of 2009, and every individual investor — including my readers at the time — made a windfall of gains in the Bakken for nearly six straight years!
But let’s be clear about something: This isn’t 2008.
Back then, we didn’t have a supply glut preventing oil prices from rallying. Thanks to the tight oil boom over the last few years, the United States’ stockpile of crude oil has exploded to 453.6 million barrels — far above the five-year range.
Yet here’s why it’s a perfect time to buy…
An Untapped Fortune
Despite the glut or even the fact that oil prices are struggling to find support above $40 per barrel, there’s a reason I’m buying into the Bakken’s future.
Perhaps the most rational reason to go long on oil is the simple fact that no matter how much we all want to see the world transition away from oil, it certainly won’t happen overnight.
The chart of petroleum’s share in the U.S. transportation sector is daunting to the most ardent believers in a future run on renewables:
And while ultra-low oil prices are taking their toll on the industry, North Dakota drillers are waiting to turn on the taps. The state had approximately 848 wells that were waiting to be fracture stimulated at the end of June.
To put a little perspective on that number, consider that approximately 9,470 Bakken wells have been drilled up through December of 2014.
Yet it’s not the amount of oil supply that Bakken companies can bring online once crude prices recover that will kick-start the third round of Bakken profits…
It’s technology.
Bakken Investors Love Technology
While I was speeding down that North Dakota highway in that tiny blue bumper car, North Dakota drillers were becoming incredibly more efficient at drilling and completing their wells.
Over the last six years, the new-well oil production per rig has jumped around 250%!
So why am I still bullish with oil barely treading water above $40 per barrel?
Well, not only are Bakken drillers boosting production rates, but they’re also significantly cutting costs. The North Dakota Department of Mineral Resources House Appropriations Committee released a report last January that showed the breakeven prices by county.
The top three counties — McKenzie, Mountrail, and Williams — each had a breakeven price between $30 and $41 per barrel.
Of course, you don’t need me to tell you what an oil production chart looks like for these three counties, but I will anyway…
Click Image to Enlarge
Even Dunn County (which actually slightly edged out Williams County for oil production in June) boasts a breakeven price of $29 per barrel.
Although these counties are a good place to start your search for your next Bakken stock, let’s not forget one other catalyst looming ahead…
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Even More Bakken Billions Ahead
Like I said in the beginning, it’s been two very long years since my boots touched North Dakota soil, around the same time the U.S. Geological Survey released its updated oil and gas assessment for the Bakken/Three Forks formation.
When the report was released at the time, it more than doubled the amount of undiscovered, technically recoverable oil in the two formations to an estimated 7.4 billion barrels.
Thing is, I still believe the USGS is lowballing the real amount and that it’s only a matter of time before USGS geologists head back to North Dakota to update their numbers.
Back in 2013, North Dakota officials were confident that the USGS’ high estimate of 11 billion barrels was a reasonable target — if technology and exploration keeps advancing.
Yet we already know drillers in the sweet spots are making huge strides!
Just take another glance above, and you can see exactly how efficient Bakken drillers have become.
The bottom line is that individual investors like us can still capitalize on the low oil price environment.
Consider today the start of the third round of Bakken profits. It’s like getting in on the ground floor all over again, and we both know how that worked out for investors that bought the bottom in early 2009.
Unfortunately, we’re more than 12 months into the most recent collapse in crude prices, and time is running out. Trust me; the last place you want to be is on the sidelines when these Bakken stocks double over the next 12 months.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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