Oil Keeps Pouring out of the Bakken

Oil production coming out of the Bakken was closing in on 800,000 barrels of oil per day as of this past March. This has some speculating that the play's production might be able to top more than a million barrels of oil per day before the year is out. Let's take a look at some of the companies that are working hard to keep oil pouring out of the Bakken.

Among them is Marathon Oil  (NYSE: MRO  ) , which has upped its guidance for Bakken production by 14% after a strong first quarter. The company thanks its increased utilization of rail capacity for helping it realize higher sales out of the region. During the first quarter, 45% of its Bakken crude oil was transported via rail, an important development in the play that enables producers to send oil to both coasts. Marathon has been further helped by some of the fastest drill times of its entire geographical portfolio; spud-to-spud time is just 25 days. This really helps boost the company's rate of return, which is very good for its bottom line. 

Source: Marathon Oil 

Another company that has enjoyed success in the Bakken is EOG Resources  (NYSE: EOG  ) , whose performance in the play has been continually impressive. EOG has worked to get its costs down which has, according to the company's president, Bill Thomas, "resulted in improved, direct after-tax rate of return from our drilling program, giving us current Bakken returns that are comparable to our Eagle Ford program. The results continue to set us up for many years of excellent drilling in the play." The company only plans to get better as its working to develop and implement new fracking techniques in the Williston, which Thomas believes will enable EOG to "continue to lead the industry in Bakken and Three Forks drilling results." This has encouraged the company to look to increase its drilling activity levels in the Bakken this year as long as crude oil prices remain in its current range.  

EOG isn't the only company improving upon its methods to achieve better returns in the play. Halcon Resources  (NYSE: HK  ) has experienced early positive results from updates it made to its Bakken drilling operations. Initial production results were improved in just the first two months of the project, with two wells seeing initial production rates increase by 20%, while a third well experienced an initial production rate that was 37% higher. Its success in the Bakken is the main reason behind the company's decision to spend about 38% of its capital budget on the play this year, which equates to about $475 million to drill 75 operated wells.

Few companies though are as levered to the Bakken as Kodiak Oil & Gas (NYSE: KOG  ) and Continental Resources (NYSE: CLR  ) . All of Kodiak's capital this year will be devoted to developing its Bakken acreage. The company expects to spend $740 million to drill about 75 net wells. This should boost the company's production from an average daily rate of 14,400 barrels of oil equivalent last year to between 29,000 and 31,000 barrels of oil equivalent per day this year before taking into account its recent acquisition.

Meanwhile, Continental has ascended to the top of the production list as the company produced 77,000 barrels of oil per day last quarter. With the top lease position in the play at 1.2 million net acres, Continental has a massive opportunity to grow its production in the future, with the potential for drilling up to 15,000 wells in the region. The company is among the lowest-cost producers with per-well costs now down to just $8.3 million. 

Bakken oil and gas companies are able to produce more oil by expending less capital, which will really drive improvements in the overall rates of return. Production growth is important, but without generating profits, that growth is of little value to investors. The good news is that the trend of lower costs and increased production looks like it will deliver significant long-term profits for investors. 

The one company to keep an eye on is Kodiak Oil & Gas. At over $10 million per well, its drilling costs are too high relative to its peers. So, while the company is a dynamic production growth story, the risk is that Kodiak is pursing growth at all costs. To learn more about whether Kodiak has what it takes to deliver returns, you're invited to check out The Motley Fool's premium research report on the company, which comes with a full year of updates and analysis as key news breaks. To get started simply click here now.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 06, 2013, at 11:54 PM, ershler wrote:

    Continental is cheap, when I was in the oil field most people didn't want to work on there rigs because their shacks and rigs were crap.

  • Report this Comment On July 02, 2013, at 9:34 AM, rru2s wrote:

    A chart bottom Canadian oil play set to pop on Keystone pipeline approval is Lightstream Resources (LSTMF - formerly known as Petrobakken - PBKEF). Current price is at a low not pierced since October 2011, with a huge thirteen percent dividend, steady quarterly production, and a huge number of wells and reserves compared to some of the smaller canadian oil stocks, all of the ducks are lined up for a HUGE run this fall when Keystone gets approved. Meanwhile, you get paid 13 percent to wait.

    Chicago Tribune article from last week states Obama indicated he would approve Keystone if there were no anticipated adverse environmental carbon pollution effects. This was a very telling remark because the draft State Department report on Keystone from March 2013 stated that Keystone was not expected to produce adverse environmental effects. Currently the state department is just going through the routine motions of weeding out and responding to one million public comments, with the final report due out this fall.

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