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The Bakken Shale is fueling an upturn in fortunes for the US oil industry and could be the prime driver of oil production growth in the US over the next decade.
By Robert Sullivan – Exclusive to Oil Investing News
US president Barack Obama’s rejection of the proposed Keystone XL pipeline and concerns over the effect of US and European sanctions on Iran’s oil industry may have clouded the outlook for international oil markets in recent weeks, but things have never looked better in North Dakota.
Production figures released by the North Dakota Oil and Gas Division (OGD) earlier this month indicated that output in the state, primarily from the Bakken Shale, passed the half a million barrel per day (bpd) mark in November.
Analysts were eager to note that this put North Dakota ahead of OPEC member Ecuador, and the milestone is also one that confirms an upturn in fortunes for the US oil industry over the last few years.
EIA forecasts higher US crude output
In an early release overview of its Annual Energy Outlook for 2012, the Energy Information Administration (EIA) indicated that US crude oil production increased from 5.1 million bpd in 2007 to 5.5 million bpd in 2010, reversing a decline that began in 1986.
The EIA also forecast that oil production would grow to 6.7 million bpd by 2020, primarily driven by the continued development of tight oil, such as the Bakken Shale, and offshore resources in the Gulf of Mexico.
And highlighting the increasing importance of unconventional oil, the report noted that shale oil could account for as much as 31 percent of total domestic output in the lower 48 states by 2035, up from 21 percent in 2010.
Bakken growth driving turnaround
The bullish projections reflect a new outlook spurred by the tremendous production growth witnessed in the Bakken Shale over the last few years.
Output from the Bakken accounted for 87 percent of the average production rate of 510,000 b pd in November, which is a 42 percent increase year-on-year and more than double where production levels stood just two years ago.
This now puts North Dakota just behind Alaska (555,000 bpd) and California (539,000 bpd) in terms of oil output. Production in Texas, meanwhile, has held steady at just under 1 million bpd since 2004.
But with production growth in North Dakota currently on track to surpass 800,000 bpd by the end of the year, Texas could soon have company as the top producer of crude oil in the US.
Top players in the Bakken
Naturally, companies with exposure in the Bakken are expected by many analysts to do well as production is ramped up.
Continental Resources Inc. (NYSE:CLR) is the largest leaseholder in the Bakken region with 901,000 acres, and with more than half of its total output coming from its Bakken holdings, Continental has seen its share price surge by more than 66 percent in the last four months to hit $80.
Hess Corp. (NYSE:HES) and Whiting Petroleum Corp. (NYSE:WLL), meanwhile, are two of the other largest leaseholders in the Bakken with 900,000 acres and 680,000 acres respectively.
Other companies considered pure Bakken plays include Statoil ASA (NYSE:STO)-owned Brigham Exploration Co. with 378,100 acres, Oasis Petroleum Inc. (NYSE:OAS) with 318,942 acres, Northern Oil & Gas Inc. (NYSEAMEX:NOG) with 150,000 acres, and Kodiak Oil & Gas Corp. (NYSE:KOG) with 95,000 acres.
Disclosure: I, Robert Sullivan, hold no direct investment interest in any company mentioned in this article.