The Bakken Oil Boom in 10 Chartshttp://www.fool.com/investing/general/2013/12/16/the-bakken-oil-boom-in-10-charts.aspx Robert Baillieul
December 16, 2013
No doubt the Bakken has become a game-changer for U.S. energy production. But while the North Dakota oil boom gets referenced a lot, you may not know what's going on. Here are ten charts that tell the story of the Bakken oil bonanza.
The Williston Basin is big
According to estimates from the United States Geological Survey, the formation contains 7.4 billion barrels of undiscovered technically recoverable crude oil. That makes the Williston Basin the largest continuous oil accumulation in the United States.
Bakken production has grown 10x in the past five years
Over the past five years, Bakken production has grown more than ten-fold to almost one million barrels per day, or bpd. This has catapulted North Dakota to the second largest energy producing state in the nation.
North Dakota is America's boom town
Based on data from the U.S. Census Bureau, North Dakota's population grew over 3% between April 2010 and July 2012. This makes the Roughrider State the fastest growing in the country. .
The Bakken boom is just getting started
Bakken wells live fast and die young
As this chart from Kodiak Oil & Gas (NYSE: KOG) shows, production from the average Bakken well falls over 90% less than four years after its drilled.
However, this is actually a good thing from an investor's perspective. That's because cash flows generated sooner have a greater net present value than cash flows generated later in a well's life. That's why Bakken wells have such high internal rates of returns and short payback periods.
Costs are falling
This can be mostly credited to the shift to padd drilling. This new technique allows operators to drill multiple wells from a single site, or padd, greatly employing efficiency and reducing surface disturbance.
Pad drilling, in combination with the falling cost of hydraulic fracturing services and other operation efficiencies, has significantly reduced the cost of doing business in the Bakken. Oasis Petroleum (NYSE: OAS), one of the leading operators in the region, has seen its average well completion costs fall 25% to $8 million per well over the past two years.
While rapid production growth steals all of the headlines, it's important to note that more of that revenue growth is trickling down to the bottom line. When you multiply Oasis's cost savings across the 28 net wells the company drilled this summer, you get $70 million in quarterly cost savings.
A lack of infrastructure is holding back growth