The oil price crash hit North Dakota's Bakken Shale very hard. Oil production in the region had been growing at a brisk pace, rising from around 200,000 barrels per day (BPD) in 2009 to a peak of more than 1.2 million BPD by 2014, according to data from the U.S. Energy Information Administration (EIA). That growth train derailed along with the price of oil, causing output to tumble below 1 million BPD by 2016.

However, the industry worked hard to cut costs and improve well productivity. Because of that, the Bakken growth engine is back on track and running at full steam, which has driven oil production up over 1.3 million BPD this year. That's just the beginning, as this oil-rich region appears as if it has enough fuel to get its output up over 2 million BPD in the future.

A drilling rig near some oil pumps with a nice sunset in the background.

Image source: Getty Images.

Drilling down into the Bakken Shale

The Bakken Shale holds an estimated 30 billion to 40 billion barrels of recoverable oil reserves according to an estimate by leading driller Continental Resources (CLR). "It's a big number but I think it's a technically sound and a technically well-founded number," said company president Jack Stark at a recent industry conference. If it holds true, that number puts the Bakken up there with some of the largest oil fields in the world.

Given the field's oil-rich resources, the industry believes it can continue growing output, with many now estimating that oil production could eventually top 2 million BPD. That's because the industry should be able to drill another 50,000 wells in North Dakota, which currently has 15,000 producing wells.

In addition to the oil-rich nature of the rocks, another factor fueling the industry's bullishness in the Bakken is the dramatic improvement in costs and well productivity, which has driven drilling returns through the roof. It used to cost $10 million and take 33 days to drill a well in the region. However, that's fallen to an average of $8.5 million and now only takes 11 days. Meanwhile, production rates per well have also increased as the industry has figured out the best formula for fracking wells to unlock a larger portion of the oil trapped underground, which has improved recovery rates from 3% to 5% of the oil in place up to 14% to 16%. Because of those improvements, Continental's rate of return has rocketed from less than 20% at $70 oil in 2011 up to a jaw-dropping 175% this year.

An oil pump in a field.

Image source: Getty Images.

These oil stocks appear poised to thrive in the next Bakken oil boom

With the Bakken's growth engine revving back up, it suggests big things are ahead for the region's leading producers. As the largest landholder in the Bakken, Continental Resources will be among the biggest beneficiaries of the Bakken's resurgence. That's already starting to happen, as the company is currently on pace to increase its production by 20% to 24% this year, which also includes growth from the STACK Shale play of Oklahoma. Meanwhile, the company anticipates that it can deliver another 15% to 20% production increase from those two growth engines in 2019 while also producing significant free cash flow in the process at current oil prices.

Oasis Petroleum (OAS), meanwhile, plans to use its strong Bakken position to drive growth in the coming years. The company is currently on pace to grow its production more than 25% this year and another 15% in 2019. Oasis Petroleum, likewise, is on pace to produce excess cash, which it could use to grow at a faster pace, pay down debt, or buy more land in the region as well as in its other growth engine in the Permian Basin.

Hess (HES 0.30%) also expects the Bakken to be a key fuel of its long-term growth plan that would see the company grow its production and cash flow at 10% and 25% compound annual growth rates, respectively, through 2023. The Bakken will drive that growth in the near term, with Hess expecting to increase its Bakken output up to 175,000 barrels of oil equivalent per day (BOE/D) by 2021, which represents a 15% to 20% compound annual growth rate. That's just the tip of the iceberg for the company, which estimates that it can drill 2,900 future wells in the region that could produce more than 1.7 billion BOE in their lifetime.

A gusher awaits

Oil production in the Bakken has quietly rebounded over the past two years, thanks in large part to the dramatic improvement in drilling returns due to efficiency and productivity gains. Because of that, oil companies are cashing in now that oil prices are on the upswing. Those two factors should give them the fuel to grow both their production and cash flow at a rapid pace in the coming years, which could create significant value for investors.