The virtual explosion of U.S. oil production has been one of the most significant events in recent investment history. But what's the best way to benefit from this trend?

For starters, the more you know about the major liquids-related plays in the U.S. -- and the companies that are laboring in them -- the more likely you'll be to generate oily profits. And if you can latch onto companies like EOG Resources (EOG -0.04%) or Marathon Oil (MRO -0.58%), companies that operate successfully in two or more of the major onshore venues, so much the better.

New life through fracking
In addition to the Permian Basin, which I discussed in a recent article, another domestic play that you should know about is the Bakken formation in North Dakota, Montana, and parts of Canada. Like the Permian, the pork-chop-shaped Bakken has been worked for a while -- since 1953, to be exact -- but has benefited immeasurably from the recent implementation of hydraulic fracturing.

The Bakken, which is part of the massive Williston Basin, consists geologically of three layers: the lower shale, the middle dolomite, and the upper shale. Most of the wells in the formation are completed in the middle layer.

In April of this year, the U.S. Geological Survey said its expectation for ultimate recovery from the Bakken was in the vicinity of 7.4 billion barrels of oil. That was a leap from the 2008 U.S.G.S. number of 3 to 4.3 billion barrels, but still far short of other estimates, which approach 25 billion recoverable barrels.

Warning signs
As recently as July 2013, Bakken wells in North Dakota -- where most are located -- produced a record total of 811,000 barrels of oil per day. Having said that, there are some warning signs that the Bakken's longevity may not be as extensive as was once believed.

For starters, while North Dakota's Bakken production is obviously expanding as a bevy of new wells come on line, its average daily output per well peaked nearly two years ago in December 2011, when it hit 144 barrels per day. Over the following 18 months, through June 2013, that average declined by 12%.

Coaxing out resistant oil
The question then becomes whether this trend can be altered. You need to know that fracking typically recovers only about 5% to 10% of the oil beneath the Bakken's surface. Advanced recovery methods, such as water flooding, can often increase that percentage dramatically -- but less so in shale rock, where the fissures tend to be far smaller. Perhaps more potential exists with carbon dioxide (CO2) injections, which likely will be initiated shortly.

But lest I appear to be sporting a Chicken Little costume, let me emphasize that the per-well production slide notwithstanding, there'll likely be enough new wells drilled in the formation during the next several years that the Energy Information Administration expects this year's likely 253 million barrels of total output to grow to about 352 million barrels in 2020. It's then expected to decline to approximately 193 million barrels by 2040.

Best Bakken buys
But that's long-range planning par excellence. I'll bet you wouldn't be shocked if I speculated that during the next couple of decades, new technologies will emerge to render the current 2040 prognostication way off the mark. Either way, investing in the Bakken remains eminently sensible. For my money, I'd do so through shares in:

  • EOG Resources. The biggest player in the Eagle Ford is also developing new spacing metrics and operating techniques that are cutting costs and increasing efficiency in both that play and the Bakken.
  • Marathon Oil. A major player in the Bakken, Marathon, whose shares have risen by 17% in the past year, also operates on more than 330,000 Eagle Ford acres.
  • Occidental Petroleum (OXY -0.20%). By far the biggest producer in the Permian, where it relies heavily on CO2 flooding, it can put that skill to use on its nearly 350,000 net Bakken acres.
  • Denbury Resources (DNR). The Plano, Texas, company is perhaps the leading light in the world of carbon dioxide injections. It works in the Cedar Creek Anticline on the southwestern edge of the Bakken.
  • Continental Resources (CLR). The largest leaseholder in the Bakken, with more than 900,000 acres, Continental also operates in the prolific Niobrara shale of the Denver-Julesburg Basin, about which I'll say more in another article.

Foolish takeaway
All five of these companies sport buy or better (2.0 or lower) consensus analysts' ratings. And all represent compelling ways to dip your investment toes in Bakken oil.