The U.S. economy turned in a somewhat disappointing performance last year. According to data from the Bureau of Economic Analysis, GDP grew by just 1.8%, down from 2.5% growth in 2012.

But despite lackluster economic performance for the nation as a whole, some states reported extremely strong growth. North Dakota took the top spot, as its GDP surged by nearly 10% in 2013. In fact, the Peace Garden state is now the second-richest state by per-capita GDP. The main reason? Its booming oil industry. 


An oil rig in North Dakota's Bakken shale. Photo credit: Ole Jorgen Bratland / Statoil ASA

Oil-and-gas-fueled growth
According to the EIA, U.S. crude oil production reached its highest level since 1989 last year, while gas production hit an all-time record high. This dramatic improvement in the nation's energy landscape fueled rapid economic growth in many hydrocarbon-rich states. In fact, three of the five fastest-growing states last year -- North Dakota, Oklahoma, and Colorado -- all have thriving oil and gas industries.

While Oklahoma, which is home to the Woodford shale and the South Central Oklahoma Oil Province, or SCOOP, play, and Colorado, which hosts the emerging Denver-Julesburg Basin, have both seen meaningful growth in their energy production, it's North Dakota, which lays claim to the prolific, oil-rich Bakken formation, that has seen the biggest turnaround in its energy picture over the past few years.

A reversal of fortune
The Bakken, a vast shale formation that spans much of North Dakota and parts of Montana, has helped drive the state's oil production to more than 1 million barrels per day, up from a meager 90,000 barrels per day as recently as 2005. This rapid production growth, coupled with high oil prices since 2009, has helped radically transform the Peace Garden state's economic position.

Its GDP has more than doubled over the past 11 years, surging from a mere $24.7 billion in 2002 to a record $49.8 billion last year (adjusted for inflation). While that still places the state among the smallest economies in the nation, its per-capita GDP of $69,000 is now the second highest in the nation, behind only Alaska.

By contrast, North Dakota's per capita GDP in 2006 was just $32,851, the 11th-lowest in the country and about 14% below that year's national average. The fact that the state went from being the 11th-poorest in the nation to the second-richest, as measured by income per person, speaks volumes about the impact of the oil and gas industry.

No slowdown in sight
Judging by energy producers' capital spending plans in the Bakken, North Dakota's oil boom is unlikely to slow down over at least the next few years. Bakken production recently surpassed the 1 million barrel-per-day (b/d) milestone and is expected to average 1.1 million b/d this year, as operators plough more than $15 billion into drilling wells, according to consultancy Wood Mackenzie.

For instance, Continental Resources (NYSE:CLR), the largest Bakken producer, plans to spend roughly half of its 2014 capital budget of $4.05 billion on the Bakken. The company expects to drill roughly 300 net Bakken wells this year, which should help drive year-over-year production growth of 26%-32%, continuing Continental's multiyear streak of double-digit output growth.

Similarly, Oasis Petroleum (NYSE:OAS) expects to spend $1.425 billion in the Bakken this year, up from $1.02 billion in 2013, which should drive 42% year-over-year growth in production. Importantly, the company expects to drill a total of 155.5 net wells this year, which is about 50% more than last year, while spending only 40% more -- a testament to its improving capital efficiency.

The bottom line
North Dakota's oil boom has transformed the state from one of the poorest to one of the richest on a per capita basis over a period of less than a decade. It has also contributed to exceptional performance for shareholders of Continental Resources and Kodiak Oil & Gas, whose share prices have surged 450% and 250%, respectively, over the past five years.

Going forward, things generally look bright for these Bakken operators. Oil prices are high and expected to remain that way, while technological improvements are likely to further reduce operating costs and improve returns. With more than a decade's worth of drilling inventory, the Bakken should continue to fuel strong growth at Continental Resources and Oasis Petroleum for years to come.

Arjun Sreekumar and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.